Correlation Between Capitec Bank and Sebata Holdings

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

Diversification Opportunities for Capitec Bank and Sebata Holdings

-0.51

Correlation Coefficient

Capitec Bank  Sebata Holdings

Excellent diversification

The 3 months correlation between Capitec and Sebata is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Sebata Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sebata Holdings 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 Sebata Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sebata Holdings has no effect on the direction of Capitec Bank i.e., Capitec Bank and Sebata Holdings go up and down completely randomly.

Pair Corralation between Capitec Bank and Sebata Holdings

Assuming the 90 days trading horizon Capitec Bank Holdings is expected to generate 0.28 times more return on investment than Sebata Holdings. However, Capitec Bank Holdings is 3.63 times less risky than Sebata Holdings. It trades about 0.05 of its potential returns per unit of risk. Sebata Holdings is currently generating about -0.03 per unit of risk. If you would invest  30,810,800  in Capitec Bank Holdings on September 26, 2024 and sell it today you would earn a total of  859,200  from holding Capitec Bank Holdings or generate 2.79% return on investment over 90 days.

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

Capitec Bank Holdings  vs.  Sebata Holdings

Capitec Bank Holdings

Risk-Adjusted Performance

3 of 100

Insignificant

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

Sebata Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sebata Holdings 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 Sebata Holdings

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

The idea behind Capitec Bank Holdings and Sebata Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.