Correlation Between Capital One and CRISPR Therapeutics

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

Diversification Opportunities for Capital One and CRISPR Therapeutics

0.55

Correlation Coefficient

Capital One  CRISPR Therapeutics

Very weak diversification

The 3 months correlation between Capital and CRISPR is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and CRISPR Therapeutics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRISPR Therapeutics 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 CRISPR Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRISPR Therapeutics has no effect on the direction of Capital One i.e., Capital One and CRISPR Therapeutics go up and down completely randomly.

Pair Corralation between Capital One and CRISPR Therapeutics

Assuming the 90 days trading horizon Capital One Financial is expected to generate 0.85 times more return on investment than CRISPR Therapeutics. However, Capital One Financial is 1.18 times less risky than CRISPR Therapeutics. It trades about 0.21 of its potential returns per unit of risk. CRISPR Therapeutics AG is currently generating about 0.03 per unit of risk. If you would invest  41,476  in Capital One Financial on October 11, 2024 and sell it today you would earn a total of  14,804  from holding Capital One Financial or generate 35.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.83%
Values	Daily Returns

Capital One Financial  vs.  CRISPR Therapeutics AG

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.

CRISPR Therapeutics

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days CRISPR Therapeutics AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CRISPR Therapeutics 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 CRISPR Therapeutics

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

The idea behind Capital One Financial and CRISPR Therapeutics AG 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.