Correlation Between Investec PLC and Capitec Bank

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

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

Diversification Opportunities for Investec PLC and Capitec Bank

-0.3

Correlation Coefficient

Investec PLC  Capitec Bank

Very good diversification

The 3 months correlation between Investec and Capitec is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Investec PLC 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 Investec PLC 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 Investec PLC 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 Investec PLC i.e., Investec PLC and Capitec Bank go up and down completely randomly.

Pair Corralation between Investec PLC and Capitec Bank

Assuming the 90 days trading horizon Investec PLC is expected to generate 0.89 times more return on investment than Capitec Bank. However, Investec PLC is 1.13 times less risky than Capitec Bank. It trades about 0.04 of its potential returns per unit of risk. Capitec Bank Holdings is currently generating about 0.01 per unit of risk. If you would invest  1,011,469  in Investec PLC on October 5, 2024 and sell it today you would earn a total of  250,631  from holding Investec PLC or generate 24.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Investec PLC  vs.  Capitec Bank Holdings

Investec PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Investec PLC and Capitec Bank

The main advantage of trading using opposite Investec PLC and Capitec Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investec PLC 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 Investec PLC 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.