Correlation Between Capital One and Valero Energy

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

Diversification Opportunities for Capital One and Valero Energy

0.11

Correlation Coefficient

Capital One  Valero Energy

Average diversification

The 3 months correlation between Capital and Valero is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy 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 Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Capital One i.e., Capital One and Valero Energy go up and down completely randomly.

Pair Corralation between Capital One and Valero Energy

If you would invest  379,452  in Capital One Financial on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Capital One Financial or generate 0.0% return on investment over 90 days.

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

Capital One Financial  vs.  Valero Energy

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.

Valero Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valero Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of 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 Valero Energy

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

The idea behind Capital One Financial and Valero Energy 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 Stocks Directory module to find actively traded stocks across global markets.