Correlation Between Capitec Bank and Famous Brands

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

Diversification Opportunities for Capitec Bank and Famous Brands

-0.04

Correlation Coefficient

Capitec Bank  Famous Brands

Good diversification

The 3 months correlation between Capitec and Famous is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Famous Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Famous Brands 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 Famous Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Famous Brands has no effect on the direction of Capitec Bank i.e., Capitec Bank and Famous Brands go up and down completely randomly.

Pair Corralation between Capitec Bank and Famous Brands

Assuming the 90 days trading horizon Capitec Bank Holdings is expected to generate 0.72 times more return on investment than Famous Brands. However, Capitec Bank Holdings is 1.39 times less risky than Famous Brands. It trades about 0.04 of its potential returns per unit of risk. Famous Brands is currently generating about -0.14 per unit of risk. If you would invest  31,299,100  in Capitec Bank Holdings on December 28, 2024 and sell it today you would earn a total of  916,300  from holding Capitec Bank Holdings or generate 2.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Capitec Bank Holdings  vs.  Famous Brands

Capitec Bank Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capitec Bank Holdings are ranked lower than 3 (%) 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.

Famous Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Famous Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Capitec Bank and Famous Brands

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

The idea behind Capitec Bank Holdings and Famous Brands 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.