Correlation Between Capitec Bank and South32

Can any of the company-specific risk be diversified away by investing in both Capitec Bank and South32 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 South32 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 South32, you can compare the effects of market volatilities on Capitec Bank and South32 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 South32. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitec Bank and South32.

Diversification Opportunities for Capitec Bank and South32

-0.13

Correlation Coefficient

Capitec Bank  South32

Good diversification

The 3 months correlation between Capitec and South32 is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and South32 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South32 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 South32. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South32 has no effect on the direction of Capitec Bank i.e., Capitec Bank and South32 go up and down completely randomly.

Pair Corralation between Capitec Bank and South32

Assuming the 90 days trading horizon Capitec Bank is expected to generate 7.09 times less return on investment than South32. But when comparing it to its historical volatility, Capitec Bank Holdings is 1.52 times less risky than South32. It trades about 0.01 of its potential returns per unit of risk. South32 is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  394,000  in South32 on December 24, 2024 and sell it today you would earn a total of  20,900  from holding South32 or generate 5.3% return on investment over 90 days.

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

Capitec Bank Holdings  vs.  South32

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.

South32

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in South32 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, South32 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Capitec Bank and South32

The main advantage of trading using opposite Capitec Bank and South32 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitec Bank position performs unexpectedly, South32 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 South32 will offset losses from the drop in South32's long position.

The idea behind Capitec Bank Holdings and South32 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 Stocks Directory module to find actively traded stocks across global markets.