Correlation Between Capital One and Danaher
Can any of the company-specific risk be diversified away by investing in both Capital One and Danaher 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 Danaher 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 Danaher, you can compare the effects of market volatilities on Capital One and Danaher 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 Danaher. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Danaher.
Diversification Opportunities for Capital One and Danaher
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Capital and Danaher is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Danaher in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danaher 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 Danaher. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danaher has no effect on the direction of Capital One i.e., Capital One and Danaher go up and down completely randomly.
Pair Corralation between Capital One and Danaher
Assuming the 90 days trading horizon Capital One Financial is expected to generate 1.18 times more return on investment than Danaher. However, Capital One is 1.18 times more volatile than Danaher. It trades about 0.17 of its potential returns per unit of risk. Danaher is currently generating about -0.11 per unit of risk. If you would invest 293,090 in Capital One Financial on September 26, 2024 and sell it today you would earn a total of 86,362 from holding Capital One Financial or generate 29.47% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Capital One Financial vs. Danaher
Performance |
Timeline |
Capital One Financial |
Danaher |
Capital One and Danaher Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Capital One and Danaher
The main advantage of trading using opposite Capital One and Danaher positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Danaher 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 Danaher will offset losses from the drop in Danaher's long position.Capital One vs. Cognizant Technology Solutions | Capital One vs. Monster Beverage Corp | Capital One vs. Costco Wholesale | Capital One vs. Taiwan Semiconductor Manufacturing |
Danaher vs. Taiwan Semiconductor Manufacturing | Danaher vs. Southern Copper | Danaher vs. McEwen Mining | Danaher vs. New Oriental Education |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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