Correlation Between Capitec Bank and Grindrod

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

Diversification Opportunities for Capitec Bank and Grindrod

0.0

Correlation Coefficient

Capitec Bank  Grindrod

Pay attention - limited upside

The 3 months correlation between Capitec and Grindrod is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Grindrod in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grindrod 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 Grindrod. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grindrod has no effect on the direction of Capitec Bank i.e., Capitec Bank and Grindrod go up and down completely randomly.

Pair Corralation between Capitec Bank and Grindrod

Assuming the 90 days trading horizon Capitec Bank Holdings is expected to generate 0.6 times more return on investment than Grindrod. However, Capitec Bank Holdings is 1.68 times less risky than Grindrod. It trades about -0.13 of its potential returns per unit of risk. Grindrod is currently generating about -0.17 per unit of risk. If you would invest  31,815,400  in Capitec Bank Holdings on October 26, 2024 and sell it today you would lose (2,605,400) from holding Capitec Bank Holdings or give up 8.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Capitec Bank Holdings  vs.  Grindrod

Capitec Bank Holdings

Risk-Adjusted Performance

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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 latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Grindrod

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grindrod 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 February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Capitec Bank and Grindrod

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

The idea behind Capitec Bank Holdings and Grindrod 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.