Correlation Between Capitec Bank and Hosken Consolidated

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

Diversification Opportunities for Capitec Bank and Hosken Consolidated

0.48

Correlation Coefficient

Capitec Bank  Hosken Consolidated

Very weak diversification

The 3 months correlation between Capitec and Hosken is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Hosken Consolidated Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hosken Consolidated 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 Hosken Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hosken Consolidated has no effect on the direction of Capitec Bank i.e., Capitec Bank and Hosken Consolidated go up and down completely randomly.

Pair Corralation between Capitec Bank and Hosken Consolidated

Assuming the 90 days trading horizon Capitec Bank Holdings is expected to under-perform the Hosken Consolidated. But the stock apears to be less risky and, when comparing its historical volatility, Capitec Bank Holdings is 1.29 times less risky than Hosken Consolidated. The stock trades about -0.37 of its potential returns per unit of risk. The Hosken Consolidated Investments is currently generating about -0.2 of returns per unit of risk over similar time horizon. If you would invest  1,679,200  in Hosken Consolidated Investments on October 12, 2024 and sell it today you would lose (77,200) from holding Hosken Consolidated Investments or give up 4.6% of portfolio value over 90 days.

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

Capitec Bank Holdings  vs.  Hosken Consolidated Investment

Capitec Bank Holdings

Risk-Adjusted Performance

0 of 100

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.

Hosken Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hosken Consolidated Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

Pair Trading with Capitec Bank and Hosken Consolidated

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

The idea behind Capitec Bank Holdings and Hosken Consolidated 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.