Correlation Between Standard Bank and Capitec Bank
Can any of the company-specific risk be diversified away by investing in both Standard Bank 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 Standard Bank and Capitec Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Standard Bank Group and Capitec Bank Holdings, you can compare the effects of market volatilities on Standard Bank 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 Standard Bank with a short position of Capitec Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Standard Bank and Capitec Bank.
Diversification Opportunities for Standard Bank and Capitec Bank
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Standard and Capitec is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Standard Bank Group 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 Standard 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 Standard Bank Group 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 Standard Bank i.e., Standard Bank and Capitec Bank go up and down completely randomly.
Pair Corralation between Standard Bank and Capitec Bank
Assuming the 90 days trading horizon Standard Bank Group is expected to generate 1.17 times more return on investment than Capitec Bank. However, Standard Bank is 1.17 times more volatile than Capitec Bank Holdings. It trades about 0.16 of its potential returns per unit of risk. Capitec Bank Holdings is currently generating about 0.02 per unit of risk. If you would invest 1,799,931 in Standard Bank Group on September 1, 2024 and sell it today you would earn a total of 568,869 from holding Standard Bank Group or generate 31.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.22% |
| Values | Daily Returns |
Standard Bank Group vs. Capitec Bank Holdings
Performance |
| Timeline |
| Standard Bank Group |
| Capitec Bank Holdings |
Standard Bank and Capitec Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Standard Bank and Capitec Bank
The main advantage of trading using opposite Standard Bank and Capitec Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Standard Bank 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.| Standard Bank vs. Ascendis Health | Standard Bank vs. We Buy Cars | Standard Bank vs. Frontier Transport Holdings | Standard Bank vs. eMedia Holdings Limited |
| Capitec Bank vs. ABSA Bank Limited | Capitec Bank vs. Capitec Bank Holdings | Capitec Bank vs. Standard Bank Group | Capitec Bank vs. Absa Group |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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