Correlation Between Capital One and Intuit

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

Diversification Opportunities for Capital One and Intuit

0.83

Correlation Coefficient

Capital One  Intuit

Very poor diversification

The 3 months correlation between Capital and Intuit is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Intuit Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intuit Inc 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 Intuit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intuit Inc has no effect on the direction of Capital One i.e., Capital One and Intuit go up and down completely randomly.

Pair Corralation between Capital One and Intuit

Assuming the 90 days trading horizon Capital One Financial is expected to under-perform the Intuit. But the stock apears to be less risky and, when comparing its historical volatility, Capital One Financial is 1.24 times less risky than Intuit. The stock trades about -0.03 of its potential returns per unit of risk. The Intuit Inc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,304,870  in Intuit Inc on September 26, 2024 and sell it today you would lose (6,563) from holding Intuit Inc or give up 0.5% of portfolio value over 90 days.

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

Capital One Financial  vs.  Intuit Inc

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.

Intuit Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Intuit Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Intuit 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 Intuit

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

The idea behind Capital One Financial and Intuit Inc 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.