Correlation Between Capital One and BlackRock California

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

Diversification Opportunities for Capital One and BlackRock California

-0.7

Correlation Coefficient

Capital One  BlackRock California

Excellent diversification

The 3 months correlation between Capital and BlackRock is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and BlackRock California Municipal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlackRock California 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 BlackRock California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlackRock California has no effect on the direction of Capital One i.e., Capital One and BlackRock California go up and down completely randomly.

Pair Corralation between Capital One and BlackRock California

Considering the 90-day investment horizon Capital One Financial is expected to generate 5.07 times more return on investment than BlackRock California. However, Capital One is 5.07 times more volatile than BlackRock California Municipal. It trades about 0.18 of its potential returns per unit of risk. BlackRock California Municipal is currently generating about -0.01 per unit of risk. If you would invest  14,513  in Capital One Financial on September 3, 2024 and sell it today you would earn a total of  4,688  from holding Capital One Financial or generate 32.3% return on investment over 90 days.

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

Capital One Financial  vs.  BlackRock California Municipal

Capital One Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Capital One reported solid returns over the last few months and may actually be approaching a breakup point.

BlackRock California

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BlackRock California Municipal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BlackRock California is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Capital One and BlackRock California

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

The idea behind Capital One Financial and BlackRock California Municipal 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.