Correlation Between Capital One and Fresenius Medical

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

Diversification Opportunities for Capital One and Fresenius Medical

-0.87

Correlation Coefficient

Capital One  Fresenius Medical

Pay attention - limited upside

The 3 months correlation between Capital and Fresenius is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care 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 Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Capital One i.e., Capital One and Fresenius Medical go up and down completely randomly.

Pair Corralation between Capital One and Fresenius Medical

If you would invest  47,114  in Capital One Financial on October 6, 2024 and sell it today you would earn a total of  9,658  from holding Capital One Financial or generate 20.5% return on investment over 90 days.

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

Capital One Financial  vs.  Fresenius Medical Care

Capital One Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 18 (%) 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.

Fresenius Medical Care

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Capital One Financial and Fresenius Medical Care 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.