Correlation Between Capital One and 3D Systems

Can any of the company-specific risk be diversified away by investing in both Capital One and 3D Systems 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 3D Systems 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 3D Systems, you can compare the effects of market volatilities on Capital One and 3D Systems 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 3D Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and 3D Systems.

Diversification Opportunities for Capital One and 3D Systems

0.68

Correlation Coefficient

Capital One  3D Systems

Poor diversification

The 3 months correlation between Capital and SYV is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and 3D Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 3D Systems 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 3D Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 3D Systems has no effect on the direction of Capital One i.e., Capital One and 3D Systems go up and down completely randomly.

Pair Corralation between Capital One and 3D Systems

Assuming the 90 days horizon Capital One is expected to generate 1.14 times less return on investment than 3D Systems. But when comparing it to its historical volatility, Capital One Financial is 1.88 times less risky than 3D Systems. It trades about 0.19 of its potential returns per unit of risk. 3D Systems is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  185.00  in 3D Systems on September 9, 2024 and sell it today you would earn a total of  69.00  from holding 3D Systems or generate 37.3% return on investment over 90 days.

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

Capital One Financial  vs.  3D Systems

Capital One Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Capital One reported solid returns over the last few months and may actually be approaching a breakup point.

3D Systems

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 3D Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, 3D Systems reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital One and 3D Systems

The main advantage of trading using opposite Capital One and 3D Systems positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, 3D Systems 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 3D Systems will offset losses from the drop in 3D Systems' long position.

The idea behind Capital One Financial and 3D Systems 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 Stocks Directory module to find actively traded stocks across global markets.