Correlation Between Capitec Bank and Rex Trueform

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

Diversification Opportunities for Capitec Bank and Rex Trueform

0.66

Correlation Coefficient

Capitec Bank  Rex Trueform

Poor diversification

The 3 months correlation between Capitec and Rex is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Rex Trueform Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rex Trueform Group 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 Rex Trueform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rex Trueform Group has no effect on the direction of Capitec Bank i.e., Capitec Bank and Rex Trueform go up and down completely randomly.

Pair Corralation between Capitec Bank and Rex Trueform

Assuming the 90 days trading horizon Capitec Bank Holdings is expected to under-perform the Rex Trueform. In addition to that, Capitec Bank is 26.65 times more volatile than Rex Trueform Group. It trades about -0.24 of its total potential returns per unit of risk. Rex Trueform Group is currently generating about -0.13 per unit of volatility. If you would invest  112,800  in Rex Trueform Group on September 24, 2024 and sell it today you would lose (100.00) from holding Rex Trueform Group or give up 0.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

Capitec Bank Holdings  vs.  Rex Trueform Group

Capitec Bank Holdings

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capitec Bank Holdings are ranked lower than 5 (%) 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.

Rex Trueform Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rex Trueform Group 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, Rex Trueform is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Capitec Bank and Rex Trueform

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

The idea behind Capitec Bank Holdings and Rex Trueform Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.