Correlation Between Capitec Bank and Anglo American

Can any of the company-specific risk be diversified away by investing in both Capitec Bank and Anglo American 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 Anglo American 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 Anglo American Platinum, you can compare the effects of market volatilities on Capitec Bank and Anglo American 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 Anglo American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitec Bank and Anglo American.

Diversification Opportunities for Capitec Bank and Anglo American

-0.06

Correlation Coefficient

Capitec Bank  Anglo American

Good diversification

The 3 months correlation between Capitec and Anglo is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and Anglo American Platinum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anglo American Platinum 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 Anglo American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anglo American Platinum has no effect on the direction of Capitec Bank i.e., Capitec Bank and Anglo American go up and down completely randomly.

Pair Corralation between Capitec Bank and Anglo American

Assuming the 90 days trading horizon Capitec Bank is expected to generate 1.03 times less return on investment than Anglo American. But when comparing it to its historical volatility, Capitec Bank Holdings is 3.36 times less risky than Anglo American. It trades about 0.18 of its potential returns per unit of risk. Anglo American Platinum is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,568,100  in Anglo American Platinum on September 14, 2024 and sell it today you would earn a total of  461,900  from holding Anglo American Platinum or generate 8.3% return on investment over 90 days.

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

Capitec Bank Holdings  vs.  Anglo American Platinum

Capitec Bank Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capitec Bank Holdings are ranked lower than 13 (%) 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 January 2025.

Anglo American Platinum

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anglo American Platinum are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Anglo American may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capitec Bank and Anglo American

The main advantage of trading using opposite Capitec Bank and Anglo American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capitec Bank position performs unexpectedly, Anglo American 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 Anglo American will offset losses from the drop in Anglo American's long position.

The idea behind Capitec Bank Holdings and Anglo American Platinum 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.