Correlation Between Capitec Bank and Renergen

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

Diversification Opportunities for Capitec Bank and Renergen

0.33

Correlation Coefficient

Capitec Bank  Renergen

Weak diversification

The 3 months correlation between Capitec and Renergen is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Renergen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renergen 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 Renergen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renergen has no effect on the direction of Capitec Bank i.e., Capitec Bank and Renergen go up and down completely randomly.

Pair Corralation between Capitec Bank and Renergen

Assuming the 90 days trading horizon Capitec Bank is expected to generate 42.33 times less return on investment than Renergen. But when comparing it to its historical volatility, Capitec Bank Holdings is 6.92 times less risky than Renergen. It trades about 0.01 of its potential returns per unit of risk. Renergen is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  71,800  in Renergen on December 29, 2024 and sell it today you would lose (2,700) from holding Renergen or give up 3.76% of portfolio value over 90 days.

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

Capitec Bank Holdings  vs.  Renergen

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.

Renergen

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Renergen are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Renergen exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capitec Bank and Renergen

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

The idea behind Capitec Bank Holdings and Renergen 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.