Correlation Between Capitec Bank and Nedbank
Can any of the company-specific risk be diversified away by investing in both Capitec Bank and Nedbank 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 Nedbank 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 Nedbank Group, you can compare the effects of market volatilities on Capitec Bank and Nedbank 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 Nedbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitec Bank and Nedbank.
Diversification Opportunities for Capitec Bank and Nedbank
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capitec and Nedbank is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Nedbank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nedbank Group 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 Nedbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nedbank Group has no effect on the direction of Capitec Bank i.e., Capitec Bank and Nedbank go up and down completely randomly.
Pair Corralation between Capitec Bank and Nedbank
Assuming the 90 days trading horizon Capitec Bank Holdings is expected to generate 1.16 times more return on investment than Nedbank. However, Capitec Bank is 1.16 times more volatile than Nedbank Group. It trades about 0.08 of its potential returns per unit of risk. Nedbank Group is currently generating about 0.07 per unit of risk. If you would invest 18,056,200 in Capitec Bank Holdings on August 26, 2024 and sell it today you would earn a total of 15,562,000 from holding Capitec Bank Holdings or generate 86.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capitec Bank Holdings vs. Nedbank Group
Performance |
| Timeline |
| Capitec Bank Holdings |
| Nedbank Group |
Capitec Bank and Nedbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capitec Bank and Nedbank
The main advantage of trading using opposite Capitec Bank and Nedbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitec Bank position performs unexpectedly, Nedbank 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 Nedbank will offset losses from the drop in Nedbank's long position.| Capitec Bank vs. Deneb Investments | Capitec Bank vs. CA Sales Holdings | Capitec Bank vs. Zeder Investments | Capitec Bank vs. Afine Investments |
| Nedbank vs. Afine Investments | Nedbank vs. ABSA Bank Limited | Nedbank vs. Trematon Capital Investments | Nedbank vs. CA Sales Holdings |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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