Correlation Between Capitec Bank and Dipula Income

Can any of the company-specific risk be diversified away by investing in both Capitec Bank and Dipula Income at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Capitec Bank and Dipula Income into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capitec Bank Holdings and Dipula Income, you can compare the effects of market volatilities on Capitec Bank and Dipula Income and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Capitec Bank with a short position of Dipula Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitec Bank and Dipula Income.

Diversification Opportunities for Capitec Bank and Dipula Income

0.66

Correlation Coefficient

Capitec Bank  Dipula Income

Poor diversification

The 3 months correlation between Capitec and Dipula is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Dipula Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dipula Income and Capitec Bank is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Capitec Bank Holdings are associated (or correlated) with Dipula Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dipula Income has no effect on the direction of Capitec Bank i.e., Capitec Bank and Dipula Income go up and down completely randomly.

Pair Corralation between Capitec Bank and Dipula Income

Assuming the 90 days trading horizon Capitec Bank Holdings is expected to under-perform the Dipula Income. But the stock apears to be less risky and, when comparing its historical volatility, Capitec Bank Holdings is 2.42 times less risky than Dipula Income. The stock trades about -0.24 of its potential returns per unit of risk. The Dipula Income is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  51,000  in Dipula Income on September 24, 2024 and sell it today you would earn a total of  0.00  from holding Dipula Income or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Capitec Bank Holdings  vs.  Dipula Income

Capitec Bank Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capitec Bank Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Capitec Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dipula Income

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dipula Income are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Dipula Income may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capitec Bank and Dipula Income

The main advantage of trading using opposite Capitec Bank and Dipula Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitec Bank position performs unexpectedly, Dipula Income can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dipula Income will offset losses from the drop in Dipula Income's long position.

The idea behind Capitec Bank Holdings and Dipula Income pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.