Correlation Between Capital One and Grupo Industrial

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

Diversification Opportunities for Capital One and Grupo Industrial

-0.27

Correlation Coefficient

Capital One  Grupo Industrial

Very good diversification

The 3 months correlation between Capital and Grupo is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Grupo Industrial Saltillo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Industrial Saltillo 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 Grupo Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Industrial Saltillo has no effect on the direction of Capital One i.e., Capital One and Grupo Industrial go up and down completely randomly.

Pair Corralation between Capital One and Grupo Industrial

Assuming the 90 days trading horizon Capital One Financial is expected to under-perform the Grupo Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Capital One Financial is 2.23 times less risky than Grupo Industrial. The stock trades about -0.23 of its potential returns per unit of risk. The Grupo Industrial Saltillo is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,706  in Grupo Industrial Saltillo on October 11, 2024 and sell it today you would lose (1.00) from holding Grupo Industrial Saltillo or give up 0.06% of portfolio value over 90 days.

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

Capital One Financial  vs.  Grupo Industrial Saltillo

Capital One Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Capital One showed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Industrial Saltillo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Industrial Saltillo 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.

Pair Trading with Capital One and Grupo Industrial

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

The idea behind Capital One Financial and Grupo Industrial Saltillo 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.