Correlation Between Capital One and Broad Capital

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

Diversification Opportunities for Capital One and Broad Capital

0.92

Correlation Coefficient

Capital One  Broad Capital

Almost no diversification

The 3 months correlation between Capital and Broad is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Broad Capital Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broad Capital Acquisition 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 Broad Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broad Capital Acquisition has no effect on the direction of Capital One i.e., Capital One and Broad Capital go up and down completely randomly.

Pair Corralation between Capital One and Broad Capital

Considering the 90-day investment horizon Capital One Financial is expected to generate 8.45 times more return on investment than Broad Capital. However, Capital One is 8.45 times more volatile than Broad Capital Acquisition. It trades about 0.18 of its potential returns per unit of risk. Broad Capital Acquisition is currently generating about 0.18 per unit of risk. If you would invest  14,049  in Capital One Financial on September 14, 2024 and sell it today you would earn a total of  4,400  from holding Capital One Financial or generate 31.32% return on investment over 90 days.

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

Capital One Financial  vs.  Broad Capital Acquisition

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 weak basic indicators, Capital One reported solid returns over the last few months and may actually be approaching a breakup point.

Broad Capital Acquisition

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Broad Capital Acquisition are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Broad Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Capital One and Broad Capital

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

The idea behind Capital One Financial and Broad Capital Acquisition 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.