Correlation Between Meta Financial and Capitol Federal

Can any of the company-specific risk be diversified away by investing in both Meta Financial and Capitol Federal 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 Meta Financial and Capitol Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Meta Financial Group and Capitol Federal Financial, you can compare the effects of market volatilities on Meta Financial and Capitol Federal 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 Meta Financial with a short position of Capitol Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Financial and Capitol Federal.

Diversification Opportunities for Meta Financial and Capitol Federal

0.87

Correlation Coefficient

Meta Financial  Capitol Federal

Very poor diversification

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

Pair Corralation between Meta Financial and Capitol Federal

Given the investment horizon of 90 days Meta Financial Group is expected to generate 0.98 times more return on investment than Capitol Federal. However, Meta Financial Group is 1.02 times less risky than Capitol Federal. It trades about 0.17 of its potential returns per unit of risk. Capitol Federal Financial is currently generating about 0.12 per unit of risk. If you would invest  6,706  in Meta Financial Group on September 4, 2024 and sell it today you would earn a total of  1,638  from holding Meta Financial Group or generate 24.43% return on investment over 90 days.

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

Meta Financial Group  vs.  Capitol Federal Financial

Meta Financial Group

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meta Financial Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Meta Financial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Capitol Federal Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capitol Federal Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Capitol Federal displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Meta Financial and Capitol Federal

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

The idea behind Meta Financial Group and Capitol Federal Financial 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.