Correlation Between BlackRock and CAPITAL

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

By analyzing existing cross correlation between BlackRock and CAPITAL ONE FINANCIAL, you can compare the effects of market volatilities on BlackRock and 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 BlackRock with a short position of CAPITAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlackRock and CAPITAL.

Diversification Opportunities for BlackRock and CAPITAL

0.22

Correlation Coefficient

BlackRock  CAPITAL

Modest diversification

The 3 months correlation between BlackRock and CAPITAL is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding BlackRock 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 BlackRock 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 BlackRock are associated (or correlated) with CAPITAL. 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 BlackRock i.e., BlackRock and CAPITAL go up and down completely randomly.

Pair Corralation between BlackRock and CAPITAL

Considering the 90-day investment horizon BlackRock is expected to generate 1.98 times more return on investment than CAPITAL. However, BlackRock is 1.98 times more volatile than CAPITAL ONE FINANCIAL. It trades about 0.02 of its potential returns per unit of risk. CAPITAL ONE FINANCIAL is currently generating about -0.12 per unit of risk. If you would invest  99,560  in BlackRock on October 21, 2024 and sell it today you would earn a total of  936.00  from holding BlackRock or generate 0.94% return on investment over 90 days.

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

BlackRock  vs.  CAPITAL ONE FINANCIAL

BlackRock

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BlackRock are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, BlackRock is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

CAPITAL ONE FINANCIAL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAPITAL ONE FINANCIAL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CAPITAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BlackRock and CAPITAL

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

The idea behind BlackRock 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.