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

-0.08

Correlation Coefficient

Capital One  Sun Communities

Good diversification

The 3 months correlation between Capital and Sun is -0.08. 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 Financial is expected to under-perform the Sun Communities. But the stock apears to be less risky and, when comparing its historical volatility, Capital One Financial is 1.25 times less risky than Sun Communities. The stock trades about -0.09 of its potential returns per unit of risk. The Sun Communities is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,742  in Sun Communities on December 30, 2024 and sell it today you would lose (60.00) from holding Sun Communities or give up 1.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Capital One Financial  vs.  Sun Communities

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 weak 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.

Sun Communities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sun Communities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sun Communities is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.