Correlation Between Upstart Holdings and Capital One

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

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

Diversification Opportunities for Upstart Holdings and Capital One

0.95

Correlation Coefficient

Upstart Holdings  Capital One

Almost no diversification

The 3 months correlation between Upstart and Capital is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Upstart Holdings 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 Upstart Holdings 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 Upstart Holdings 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 Upstart Holdings i.e., Upstart Holdings and Capital One go up and down completely randomly.

Pair Corralation between Upstart Holdings and Capital One

Given the investment horizon of 90 days Upstart Holdings is expected to generate 2.67 times more return on investment than Capital One. However, Upstart Holdings is 2.67 times more volatile than Capital One Financial. It trades about 0.19 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.18 per unit of risk. If you would invest  3,826  in Upstart Holdings on September 3, 2024 and sell it today you would earn a total of  4,053  from holding Upstart Holdings or generate 105.93% return on investment over 90 days.

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

Upstart Holdings  vs.  Capital One Financial

Upstart Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Upstart Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Upstart Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Upstart Holdings and Capital One

The main advantage of trading using opposite Upstart Holdings and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Upstart Holdings 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 Upstart Holdings 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.