Correlation Between Capital One and First Republic

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

Diversification Opportunities for Capital One and First Republic

0.0

Correlation Coefficient

Capital One  First Republic

Pay attention - limited upside

The 3 months correlation between Capital and First is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and First Republic Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Republic Bank 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 First Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Republic Bank has no effect on the direction of Capital One i.e., Capital One and First Republic go up and down completely randomly.

Pair Corralation between Capital One and First Republic

If you would invest  6,095  in First Republic Bank on December 30, 2024 and sell it today you would earn a total of  0.00  from holding First Republic Bank or generate 0.0% return on investment over 90 days.

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

Capital One Financial  vs.  First Republic Bank

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. In spite of fairly strong technical and fundamental indicators, Capital One is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

First Republic Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Republic Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, First Republic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Capital One and First Republic

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

The idea behind Capital One Financial and First Republic Bank 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.