Correlation Between Capital One and Fiserv

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

Diversification Opportunities for Capital One and Fiserv

0.94

Correlation Coefficient

Capital One  Fiserv

Almost no diversification

The 3 months correlation between Capital and Fiserv is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Fiserv Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fiserv Inc 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 Fiserv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fiserv Inc has no effect on the direction of Capital One i.e., Capital One and Fiserv go up and down completely randomly.

Pair Corralation between Capital One and Fiserv

Assuming the 90 days trading horizon Capital One Financial is expected to generate 1.76 times more return on investment than Fiserv. However, Capital One is 1.76 times more volatile than Fiserv Inc. It trades about 0.21 of its potential returns per unit of risk. Fiserv Inc is currently generating about 0.27 per unit of risk. If you would invest  40,857  in Capital One Financial on September 13, 2024 and sell it today you would earn a total of  15,915  from holding Capital One Financial or generate 38.95% return on investment over 90 days.

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

Capital One Financial  vs.  Fiserv Inc

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.

Fiserv Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fiserv Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Fiserv sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital One and Fiserv

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

The idea behind Capital One Financial and Fiserv Inc 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.