Correlation Between Capitec Bank and ABSA Bank
Can any of the company-specific risk be diversified away by investing in both Capitec Bank and ABSA 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 Capitec Bank and ABSA Bank 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 ABSA Bank Limited, you can compare the effects of market volatilities on Capitec Bank and ABSA 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 Capitec Bank with a short position of ABSA Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitec Bank and ABSA Bank.
Diversification Opportunities for Capitec Bank and ABSA Bank
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capitec and ABSA is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and ABSA Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABSA Bank Limited 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 ABSA Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABSA Bank Limited has no effect on the direction of Capitec Bank i.e., Capitec Bank and ABSA Bank go up and down completely randomly.
Pair Corralation between Capitec Bank and ABSA Bank
Assuming the 90 days trading horizon Capitec Bank Holdings is expected to generate 1.25 times more return on investment than ABSA Bank. However, Capitec Bank is 1.25 times more volatile than ABSA Bank Limited. It trades about 0.07 of its potential returns per unit of risk. ABSA Bank Limited is currently generating about 0.03 per unit of risk. If you would invest 30,218,400 in Capitec Bank Holdings on November 18, 2024 and sell it today you would earn a total of 547,400 from holding Capitec Bank Holdings or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capitec Bank Holdings vs. ABSA Bank Limited
Performance |
| Timeline |
| Capitec Bank Holdings |
| ABSA Bank Limited |
Capitec Bank and ABSA Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capitec Bank and ABSA Bank
The main advantage of trading using opposite Capitec Bank and ABSA Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitec Bank position performs unexpectedly, ABSA 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 ABSA Bank will offset losses from the drop in ABSA Bank's long position.| Capitec Bank vs. Kap Industrial Holdings | Capitec Bank vs. Lesaka Technologies | Capitec Bank vs. Trematon Capital Investments | Capitec Bank vs. Advtech |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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