Correlation Between Capital One and Accenture Plc

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

Diversification Opportunities for Capital One and Accenture Plc

0.73

Correlation Coefficient

Capital One  Accenture Plc

Poor diversification

The 3 months correlation between Capital and Accenture is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Accenture plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accenture plc 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 Accenture Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accenture plc has no effect on the direction of Capital One i.e., Capital One and Accenture Plc go up and down completely randomly.

Pair Corralation between Capital One and Accenture Plc

Assuming the 90 days trading horizon Capital One Financial is expected to under-perform the Accenture Plc. But the stock apears to be less risky and, when comparing its historical volatility, Capital One Financial is 7.23 times less risky than Accenture Plc. The stock trades about -0.24 of its potential returns per unit of risk. The Accenture plc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  215,863  in Accenture plc on October 15, 2024 and sell it today you would lose (1,263) from holding Accenture plc or give up 0.59% of portfolio value over 90 days.

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

Capital One Financial  vs.  Accenture plc

Capital One Financial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Capital One sustained solid returns over the last few months and may actually be approaching a breakup point.

Accenture plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Accenture plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Accenture Plc 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 Accenture Plc

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

The idea behind Capital One Financial and Accenture plc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.