Correlation Between Capital One and Boston Scientific

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

Diversification Opportunities for Capital One and Boston Scientific

0.56

Correlation Coefficient

Capital One  Boston Scientific

Very weak diversification

The 3 months correlation between Capital and Boston is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Boston Scientific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Scientific 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 Boston Scientific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Scientific has no effect on the direction of Capital One i.e., Capital One and Boston Scientific go up and down completely randomly.

Pair Corralation between Capital One and Boston Scientific

Assuming the 90 days trading horizon Capital One Financial is expected to under-perform the Boston Scientific. In addition to that, Capital One is 1.44 times more volatile than Boston Scientific. It trades about -0.09 of its total potential returns per unit of risk. Boston Scientific is currently generating about 0.02 per unit of volatility. If you would invest  56,286  in Boston Scientific on December 24, 2024 and sell it today you would earn a total of  671.00  from holding Boston Scientific or generate 1.19% return on investment over 90 days.

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

Capital One Financial  vs.  Boston Scientific

Capital One Financial

Risk-Adjusted Performance

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 latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Boston Scientific

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Boston Scientific are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Boston Scientific 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 Boston Scientific

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

The idea behind Capital One Financial and Boston Scientific 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.