Correlation Between Capitec Bank and Deneb Investments

Can any of the company-specific risk be diversified away by investing in both Capitec Bank and Deneb Investments 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 Deneb Investments 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 Deneb Investments, you can compare the effects of market volatilities on Capitec Bank and Deneb Investments 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 Deneb Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitec Bank and Deneb Investments.

Diversification Opportunities for Capitec Bank and Deneb Investments

-0.4

Correlation Coefficient

Capitec Bank  Deneb Investments

Very good diversification

The 3 months correlation between Capitec and Deneb is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Deneb Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deneb Investments 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 Deneb Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deneb Investments has no effect on the direction of Capitec Bank i.e., Capitec Bank and Deneb Investments go up and down completely randomly.

Pair Corralation between Capitec Bank and Deneb Investments

Assuming the 90 days trading horizon Capitec Bank is expected to generate 20.8 times less return on investment than Deneb Investments. But when comparing it to its historical volatility, Capitec Bank Holdings is 1.53 times less risky than Deneb Investments. It trades about 0.01 of its potential returns per unit of risk. Deneb Investments is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  20,200  in Deneb Investments on December 30, 2024 and sell it today you would earn a total of  1,700  from holding Deneb Investments or generate 8.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Capitec Bank Holdings  vs.  Deneb Investments

Capitec Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capitec Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Deneb Investments

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deneb Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Deneb Investments may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Capitec Bank and Deneb Investments

The main advantage of trading using opposite Capitec Bank and Deneb Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitec Bank position performs unexpectedly, Deneb Investments 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 Deneb Investments will offset losses from the drop in Deneb Investments' long position.

The idea behind Capitec Bank Holdings and Deneb Investments 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.