Correlation Between Capitec Bank and Workforce Holdings
Can any of the company-specific risk be diversified away by investing in both Capitec Bank and Workforce 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 Workforce 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 Workforce Holdings, you can compare the effects of market volatilities on Capitec Bank and Workforce 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 Workforce Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitec Bank and Workforce Holdings.
Diversification Opportunities for Capitec Bank and Workforce Holdings
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Capitec and Workforce is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Workforce Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Workforce 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 Workforce Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Workforce Holdings has no effect on the direction of Capitec Bank i.e., Capitec Bank and Workforce Holdings go up and down completely randomly.
Pair Corralation between Capitec Bank and Workforce Holdings
Assuming the 90 days trading horizon Capitec Bank is expected to generate 1.32 times less return on investment than Workforce Holdings. But when comparing it to its historical volatility, Capitec Bank Holdings is 2.54 times less risky than Workforce Holdings. It trades about 0.15 of its potential returns per unit of risk. Workforce Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 10,100 in Workforce Holdings on September 24, 2024 and sell it today you would earn a total of 4,500 from holding Workforce Holdings or generate 44.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 99.39% |
Values | Daily Returns |
Capitec Bank Holdings vs. Workforce Holdings
Performance |
Timeline |
Capitec Bank Holdings |
Workforce Holdings |
Capitec Bank and Workforce Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Capitec Bank and Workforce Holdings
The main advantage of trading using opposite Capitec Bank and Workforce Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitec Bank position performs unexpectedly, Workforce 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 Workforce Holdings will offset losses from the drop in Workforce Holdings' long position.Capitec Bank vs. Safari Investments RSA | Capitec Bank vs. Astral Foods | Capitec Bank vs. City Lodge Hotels | Capitec Bank vs. CA Sales Holdings |
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Check out your portfolio center.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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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