Correlation Between Capital One and WesBanco

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

Diversification Opportunities for Capital One and WesBanco

0.56

Correlation Coefficient

Capital One  WesBanco

Very weak diversification

The 3 months correlation between Capital and WesBanco is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and WesBanco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WesBanco 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 WesBanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WesBanco has no effect on the direction of Capital One i.e., Capital One and WesBanco go up and down completely randomly.

Pair Corralation between Capital One and WesBanco

Assuming the 90 days trading horizon Capital One Financial is expected to generate 3.76 times more return on investment than WesBanco. However, Capital One is 3.76 times more volatile than WesBanco. It trades about 0.04 of its potential returns per unit of risk. WesBanco is currently generating about 0.1 per unit of risk. If you would invest  1,790  in Capital One Financial on December 29, 2024 and sell it today you would earn a total of  47.00  from holding Capital One Financial or generate 2.63% return on investment over 90 days.

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

Capital One Financial  vs.  WesBanco

Capital One Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady technical and fundamental indicators, Capital One is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

WesBanco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WesBanco are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, WesBanco is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Capital One and WesBanco

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

The idea behind Capital One Financial and WesBanco 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.