Correlation Between Capital One and SEGRO Plc

Can any of the company-specific risk be diversified away by investing in both Capital One and SEGRO Plc 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 Capital One and SEGRO Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capital One Financial and SEGRO Plc, you can compare the effects of market volatilities on Capital One and SEGRO Plc 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 Capital One with a short position of SEGRO Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and SEGRO Plc.

Diversification Opportunities for Capital One and SEGRO Plc

-0.88

Correlation Coefficient

Capital One  SEGRO Plc

Pay attention - limited upside

The 3 months correlation between Capital and SEGRO is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and SEGRO Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEGRO Plc and Capital One 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 Capital One Financial are associated (or correlated) with SEGRO Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEGRO Plc has no effect on the direction of Capital One i.e., Capital One and SEGRO Plc go up and down completely randomly.

Pair Corralation between Capital One and SEGRO Plc

Assuming the 90 days horizon Capital One Financial is expected to generate 1.65 times more return on investment than SEGRO Plc. However, Capital One is 1.65 times more volatile than SEGRO Plc. It trades about 0.18 of its potential returns per unit of risk. SEGRO Plc is currently generating about -0.07 per unit of risk. If you would invest  12,856  in Capital One Financial on September 5, 2024 and sell it today you would earn a total of  4,944  from holding Capital One Financial or generate 38.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Capital One Financial  vs.  SEGRO Plc

Capital One Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Capital One reported solid returns over the last few months and may actually be approaching a breakup point.

SEGRO Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEGRO Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Capital One and SEGRO Plc

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

The idea behind Capital One Financial and SEGRO Plc 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.