Correlation Between Capitec Bank and MultiChoice

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

Diversification Opportunities for Capitec Bank and MultiChoice

0.12

Correlation Coefficient

Capitec Bank  MultiChoice

Average diversification

The 3 months correlation between Capitec and MultiChoice is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and MultiChoice Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MultiChoice 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 MultiChoice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MultiChoice Group has no effect on the direction of Capitec Bank i.e., Capitec Bank and MultiChoice go up and down completely randomly.

Pair Corralation between Capitec Bank and MultiChoice

Assuming the 90 days trading horizon Capitec Bank Holdings is expected to generate 0.78 times more return on investment than MultiChoice. However, Capitec Bank Holdings is 1.28 times less risky than MultiChoice. It trades about 0.13 of its potential returns per unit of risk. MultiChoice Group is currently generating about 0.05 per unit of risk. If you would invest  16,401,200  in Capitec Bank Holdings on September 12, 2024 and sell it today you would earn a total of  16,753,500  from holding Capitec Bank Holdings or generate 102.15% return on investment over 90 days.

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

Capitec Bank Holdings  vs.  MultiChoice Group

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.

MultiChoice Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MultiChoice Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, MultiChoice is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Capitec Bank and MultiChoice

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

The idea behind Capitec Bank Holdings and MultiChoice Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.