Correlation Between Coreshares Index and Capitec Bank

Can any of the company-specific risk be diversified away by investing in both Coreshares Index 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 Coreshares Index and Capitec Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Coreshares Index Tracker and Capitec Bank Holdings, you can compare the effects of market volatilities on Coreshares Index 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 Coreshares Index with a short position of Capitec Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coreshares Index and Capitec Bank.

Diversification Opportunities for Coreshares Index and Capitec Bank

0.58

Correlation Coefficient

Coreshares Index  Capitec Bank

Very weak diversification

The 3 months correlation between Coreshares and Capitec is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Coreshares Index Tracker 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 Coreshares Index 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 Coreshares Index Tracker 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 Coreshares Index i.e., Coreshares Index and Capitec Bank go up and down completely randomly.

Pair Corralation between Coreshares Index and Capitec Bank

Assuming the 90 days trading horizon Coreshares Index is expected to generate 14.93 times less return on investment than Capitec Bank. But when comparing it to its historical volatility, Coreshares Index Tracker is 1.11 times less risky than Capitec Bank. It trades about 0.01 of its potential returns per unit of risk. Capitec Bank Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  29,241,000  in Capitec Bank Holdings on September 1, 2024 and sell it today you would earn a total of  3,370,800  from holding Capitec Bank Holdings or generate 11.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Coreshares Index Tracker  vs.  Capitec Bank Holdings

Coreshares Index Tracker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coreshares Index Tracker has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Coreshares Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Capitec Bank Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capitec Bank Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Capitec Bank may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Coreshares Index and Capitec Bank

The main advantage of trading using opposite Coreshares Index and Capitec Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coreshares Index 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.

The idea behind Coreshares Index Tracker and Capitec Bank Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.