Correlation Between Capital One and Grupo Profuturo

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

Diversification Opportunities for Capital One and Grupo Profuturo

0.01

Correlation Coefficient

Capital One  Grupo Profuturo

Significant diversification

The 3 months correlation between Capital and Grupo is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Grupo Profuturo SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Profuturo SAB 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 Profuturo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Profuturo SAB has no effect on the direction of Capital One i.e., Capital One and Grupo Profuturo go up and down completely randomly.

Pair Corralation between Capital One and Grupo Profuturo

Assuming the 90 days trading horizon Capital One Financial is expected to generate 1.26 times more return on investment than Grupo Profuturo. However, Capital One is 1.26 times more volatile than Grupo Profuturo SAB. It trades about 0.14 of its potential returns per unit of risk. Grupo Profuturo SAB is currently generating about 0.07 per unit of risk. If you would invest  219,804  in Capital One Financial on September 12, 2024 and sell it today you would earn a total of  159,648  from holding Capital One Financial or generate 72.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Capital One Financial  vs.  Grupo Profuturo SAB

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. 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 Profuturo SAB

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Profuturo SAB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Grupo Profuturo is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Capital One and Grupo Profuturo

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

The idea behind Capital One Financial and Grupo Profuturo SAB 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.

Check out your portfolio center.

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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.