Correlation Between Capitec Bank and Wilson Bayly

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

Diversification Opportunities for Capitec Bank and Wilson Bayly

-0.61

Correlation Coefficient

Capitec Bank  Wilson Bayly

Excellent diversification

The 3 months correlation between Capitec and Wilson is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Wilson Bayly Holmes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilson Bayly Holmes 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 Wilson Bayly. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilson Bayly Holmes has no effect on the direction of Capitec Bank i.e., Capitec Bank and Wilson Bayly go up and down completely randomly.

Pair Corralation between Capitec Bank and Wilson Bayly

Assuming the 90 days trading horizon Capitec Bank is expected to generate 1.52 times less return on investment than Wilson Bayly. But when comparing it to its historical volatility, Capitec Bank Holdings is 1.27 times less risky than Wilson Bayly. It trades about 0.08 of its potential returns per unit of risk. Wilson Bayly Holmes is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  929,000  in Wilson Bayly Holmes on September 23, 2024 and sell it today you would earn a total of  1,270,800  from holding Wilson Bayly Holmes or generate 136.79% return on investment over 90 days.

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

Capitec Bank Holdings  vs.  Wilson Bayly Holmes

Capitec Bank Holdings

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capitec Bank Holdings are ranked lower than 4 (%) 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.

Wilson Bayly Holmes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilson Bayly Holmes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Wilson Bayly 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 Wilson Bayly

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

The idea behind Capitec Bank Holdings and Wilson Bayly Holmes 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.