Correlation Between Shoprite Holdings and Capitec Bank
Can any of the company-specific risk be diversified away by investing in both Shoprite Holdings 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 Shoprite Holdings and Capitec Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Shoprite Holdings and Capitec Bank Holdings, you can compare the effects of market volatilities on Shoprite Holdings 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 Shoprite Holdings with a short position of Capitec Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Shoprite Holdings and Capitec Bank.
Diversification Opportunities for Shoprite Holdings and Capitec Bank
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Shoprite and Capitec is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Shoprite Holdings 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 Shoprite Holdings 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 Shoprite Holdings 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 Shoprite Holdings i.e., Shoprite Holdings and Capitec Bank go up and down completely randomly.
Pair Corralation between Shoprite Holdings and Capitec Bank
Assuming the 90 days trading horizon Shoprite Holdings is expected to generate 2.25 times less return on investment than Capitec Bank. But when comparing it to its historical volatility, Shoprite Holdings is 1.13 times less risky than Capitec Bank. It trades about 0.04 of its potential returns per unit of risk. Capitec Bank Holdings is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 18,080,200 in Capitec Bank Holdings on August 28, 2024 and sell it today you would earn a total of 15,192,000 from holding Capitec Bank Holdings or generate 84.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Shoprite Holdings vs. Capitec Bank Holdings
Performance |
| Timeline |
| Shoprite Holdings |
| Capitec Bank Holdings |
Shoprite Holdings and Capitec Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Shoprite Holdings and Capitec Bank
The main advantage of trading using opposite Shoprite Holdings and Capitec Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shoprite Holdings 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.| Shoprite Holdings vs. Growthpoint Properties | Shoprite Holdings vs. AfricaRhodium ETF | Shoprite Holdings vs. CoreShares Preference Share | Shoprite Holdings vs. Indexco Limited |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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