Correlation Between Capitec Bank and RMB Holdings

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

Diversification Opportunities for Capitec Bank and RMB Holdings

0.0

Correlation Coefficient

Capitec Bank  RMB Holdings

Pay attention - limited upside

The 3 months correlation between Capitec and RMB is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Capitec Bank Holdings and RMB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RMB Holdings 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 RMB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RMB Holdings has no effect on the direction of Capitec Bank i.e., Capitec Bank and RMB Holdings go up and down completely randomly.

Pair Corralation between Capitec Bank and RMB Holdings

Assuming the 90 days trading horizon Capitec Bank is expected to generate 23.69 times less return on investment than RMB Holdings. But when comparing it to its historical volatility, Capitec Bank Holdings is 30.64 times less risky than RMB Holdings. It trades about 0.22 of its potential returns per unit of risk. RMB Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,200  in RMB Holdings on September 17, 2024 and sell it today you would earn a total of  300.00  from holding RMB Holdings or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Capitec Bank Holdings  vs.  RMB Holdings

Capitec Bank Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capitec Bank Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Capitec Bank is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

RMB Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RMB Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, RMB Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capitec Bank and RMB Holdings

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

The idea behind Capitec Bank Holdings and RMB 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.