Correlation Between Capitec Bank and Absa
Can any of the company-specific risk be diversified away by investing in both Capitec Bank and Absa 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 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 Group, you can compare the effects of market volatilities on Capitec Bank and Absa 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitec Bank and Absa.
Diversification Opportunities for Capitec Bank and Absa
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Capitec and Absa is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Absa Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absa 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 Absa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absa Group has no effect on the direction of Capitec Bank i.e., Capitec Bank and Absa go up and down completely randomly.
Pair Corralation between Capitec Bank and Absa
Assuming the 90 days trading horizon Capitec Bank is expected to generate 5.19 times less return on investment than Absa. But when comparing it to its historical volatility, Capitec Bank Holdings is 1.49 times less risky than Absa. It trades about 0.02 of its potential returns per unit of risk. Absa Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,488,236 in Absa Group on September 1, 2024 and sell it today you would earn a total of 236,764 from holding Absa Group or generate 15.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
Capitec Bank Holdings vs. Absa Group
Performance |
| Timeline |
| Capitec Bank Holdings |
| Absa Group |
Capitec Bank and Absa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capitec Bank and Absa
The main advantage of trading using opposite Capitec Bank and Absa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitec Bank position performs unexpectedly, Absa 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 will offset losses from the drop in Absa's long position.| Capitec Bank vs. ABSA Bank Limited | Capitec Bank vs. Capitec Bank Holdings | Capitec Bank vs. Standard Bank Group | Capitec Bank vs. Absa Group |
| Absa vs. eMedia Holdings Limited | Absa vs. We Buy Cars | Absa vs. Frontier Transport Holdings | Absa vs. HomeChoice 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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