Correlation Between Blue Label and Capitec Bank
Can any of the company-specific risk be diversified away by investing in both Blue Label 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 Blue Label and Capitec Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Label Telecoms and Capitec Bank Holdings, you can compare the effects of market volatilities on Blue Label 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 Blue Label with a short position of Capitec Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Label and Capitec Bank.
Diversification Opportunities for Blue Label and Capitec Bank
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Blue and Capitec is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Blue Label Telecoms 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 Blue Label 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 Blue Label Telecoms 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 Blue Label i.e., Blue Label and Capitec Bank go up and down completely randomly.
Pair Corralation between Blue Label and Capitec Bank
Assuming the 90 days trading horizon Blue Label Telecoms is expected to under-perform the Capitec Bank. But the stock apears to be less risky and, when comparing its historical volatility, Blue Label Telecoms is 1.15 times less risky than Capitec Bank. The stock trades about -0.38 of its potential returns per unit of risk. The Capitec Bank Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 31,623,400 in Capitec Bank Holdings on August 31, 2024 and sell it today you would earn a total of 1,054,700 from holding Capitec Bank Holdings or generate 3.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Label Telecoms vs. Capitec Bank Holdings
Performance |
| Timeline |
| Blue Label Telecoms |
| Capitec Bank Holdings |
Blue Label and Capitec Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Label and Capitec Bank
The main advantage of trading using opposite Blue Label and Capitec Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Label 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 Blue Label Telecoms 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.| Capitec Bank vs. Safari Investments RSA | Capitec Bank vs. Afine Investments | Capitec Bank vs. eMedia Holdings Limited | Capitec Bank vs. Deneb Investments |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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