Correlation Between Capital One and Sun Communities

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

Diversification Opportunities for Capital One and Sun Communities

-0.19

Correlation Coefficient

Capital One  Sun Communities

Good diversification

The 3 months correlation between Capital and Sun is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Sun Communities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Communities 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 Sun Communities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Communities has no effect on the direction of Capital One i.e., Capital One and Sun Communities go up and down completely randomly.

Pair Corralation between Capital One and Sun Communities

Assuming the 90 days trading horizon Capital One is expected to generate 1.53 times less return on investment than Sun Communities. But when comparing it to its historical volatility, Capital One Financial is 2.14 times less risky than Sun Communities. It trades about 0.07 of its potential returns per unit of risk. Sun Communities is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,770  in Sun Communities on December 5, 2024 and sell it today you would earn a total of  238.00  from holding Sun Communities or generate 6.31% return on investment over 90 days.

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

Capital One Financial  vs.  Sun Communities

Capital One Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Capital One is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sun Communities

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Communities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Sun Communities may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Capital One and Sun Communities

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

The idea behind Capital One Financial and Sun Communities 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.