Correlation Between Capitec Bank and Investec

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

Diversification Opportunities for Capitec Bank and Investec

-0.18

Correlation Coefficient

Capitec Bank  Investec

Good diversification

The 3 months correlation between Capitec and Investec is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Investec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec 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 Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec has no effect on the direction of Capitec Bank i.e., Capitec Bank and Investec go up and down completely randomly.

Pair Corralation between Capitec Bank and Investec

Assuming the 90 days trading horizon Capitec Bank is expected to generate 2.44 times less return on investment than Investec. In addition to that, Capitec Bank is 1.07 times more volatile than Investec. It trades about 0.01 of its total potential returns per unit of risk. Investec is currently generating about 0.03 per unit of volatility. If you would invest  1,163,402  in Investec on September 25, 2024 and sell it today you would earn a total of  86,598  from holding Investec or generate 7.44% 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.  Investec

Capitec Bank Holdings

Risk-Adjusted Performance

0 of 100

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 comparatively stable basic indicators, Capitec Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Investec

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investec has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investec is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Capitec Bank and Investec

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

The idea behind Capitec Bank Holdings and Investec 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.