Correlation Between Deneb Investments and Capitec Bank

Can any of the company-specific risk be diversified away by investing in both Deneb Investments and Capitec Bank 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 Deneb Investments and Capitec Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Deneb Investments and Capitec Bank Holdings, you can compare the effects of market volatilities on Deneb Investments and Capitec Bank 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 Deneb Investments with a short position of Capitec Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Deneb Investments and Capitec Bank.

Diversification Opportunities for Deneb Investments and Capitec Bank

0.32

Correlation Coefficient

Deneb Investments  Capitec Bank

Weak diversification

The 3 months correlation between Deneb and Capitec is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Deneb Investments and Capitec Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitec Bank Holdings and Deneb Investments 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 Deneb Investments are associated (or correlated) with Capitec Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitec Bank Holdings has no effect on the direction of Deneb Investments i.e., Deneb Investments and Capitec Bank go up and down completely randomly.

Pair Corralation between Deneb Investments and Capitec Bank

Assuming the 90 days trading horizon Deneb Investments is expected to under-perform the Capitec Bank. In addition to that, Deneb Investments is 2.19 times more volatile than Capitec Bank Holdings. It trades about -0.04 of its total potential returns per unit of risk. Capitec Bank Holdings is currently generating about -0.07 per unit of volatility. If you would invest  32,512,000  in Capitec Bank Holdings on December 1, 2024 and sell it today you would lose (1,768,300) from holding Capitec Bank Holdings or give up 5.44% of portfolio value over 90 days.

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

Deneb Investments  vs.  Capitec Bank Holdings

Deneb Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Deneb Investments 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.

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.

Pair Trading with Deneb Investments and Capitec Bank

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

The idea behind Deneb Investments and Capitec Bank 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.