Correlation Between Nampak and Capitec Bank

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

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

Diversification Opportunities for Nampak and Capitec Bank

0.03

Correlation Coefficient

Nampak  Capitec Bank

Significant diversification

The 3 months correlation between Nampak and Capitec is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Nampak 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 Nampak 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 Nampak 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 Nampak i.e., Nampak and Capitec Bank go up and down completely randomly.

Pair Corralation between Nampak and Capitec Bank

Assuming the 90 days trading horizon Nampak is expected to generate 37.65 times more return on investment than Capitec Bank. However, Nampak is 37.65 times more volatile than Capitec Bank Holdings. It trades about 0.06 of its potential returns per unit of risk. Capitec Bank Holdings is currently generating about 0.08 per unit of risk. If you would invest  2,575,000  in Nampak on September 27, 2024 and sell it today you would earn a total of  1,567,300  from holding Nampak or generate 60.87% return on investment over 90 days.

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

Nampak  vs.  Capitec Bank Holdings

Nampak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nampak 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

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capitec Bank Holdings are ranked lower than 3 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nampak and Capitec Bank

The main advantage of trading using opposite Nampak and Capitec Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nampak 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 Nampak 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.