Correlation Between Capital One and Grupo Hotelero
Can any of the company-specific risk be diversified away by investing in both Capital One and Grupo Hotelero 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 Hotelero 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 Hotelero Santa, you can compare the effects of market volatilities on Capital One and Grupo Hotelero 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 Hotelero. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Grupo Hotelero.
Diversification Opportunities for Capital One and Grupo Hotelero
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Grupo is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Grupo Hotelero Santa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Hotelero Santa 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 Hotelero. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Hotelero Santa has no effect on the direction of Capital One i.e., Capital One and Grupo Hotelero go up and down completely randomly.
Pair Corralation between Capital One and Grupo Hotelero
Assuming the 90 days trading horizon Capital One Financial is expected to generate 0.54 times more return on investment than Grupo Hotelero. However, Capital One Financial is 1.85 times less risky than Grupo Hotelero. It trades about -0.03 of its potential returns per unit of risk. Grupo Hotelero Santa is currently generating about -0.02 per unit of risk. If you would invest 382,986 in Capital One Financial on September 25, 2024 and sell it today you would lose (3,534) from holding Capital One Financial or give up 0.92% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Capital One Financial vs. Grupo Hotelero Santa
Performance |
Timeline |
Capital One Financial |
Grupo Hotelero Santa |
Capital One and Grupo Hotelero Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Capital One and Grupo Hotelero
The main advantage of trading using opposite Capital One and Grupo Hotelero positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Grupo Hotelero 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 Hotelero will offset losses from the drop in Grupo Hotelero's long position.Capital One vs. GMxico Transportes SAB | Capital One vs. Samsung Electronics Co | Capital One vs. CVS Health | Capital One vs. Martin Marietta Materials |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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