Correlation Between Runway Growth and Capital One

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

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

Diversification Opportunities for Runway Growth and Capital One

0.5

Correlation Coefficient

Runway Growth  Capital One

Very weak diversification

The 3 months correlation between Runway and Capital is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Runway Growth Finance and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial and Runway Growth 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 Runway Growth Finance are associated (or correlated) with Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Runway Growth i.e., Runway Growth and Capital One go up and down completely randomly.

Pair Corralation between Runway Growth and Capital One

Given the investment horizon of 90 days Runway Growth Finance is expected to generate 1.22 times more return on investment than Capital One. However, Runway Growth is 1.22 times more volatile than Capital One Financial. It trades about 0.15 of its potential returns per unit of risk. Capital One Financial is currently generating about -0.17 per unit of risk. If you would invest  1,026  in Runway Growth Finance on September 27, 2024 and sell it today you would earn a total of  53.00  from holding Runway Growth Finance or generate 5.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Runway Growth Finance  vs.  Capital One Financial

Runway Growth Finance

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Runway Growth Finance are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Runway Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Capital One Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Capital One reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Runway Growth and Capital One

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

The idea behind Runway Growth Finance and Capital One Financial 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.