Correlation Between Capital One and Bancroft Fund

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

Diversification Opportunities for Capital One and Bancroft Fund

0.72

Correlation Coefficient

Capital One  Bancroft Fund

Poor diversification

The 3 months correlation between Capital and Bancroft is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Bancroft Fund Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancroft Fund Limited 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 Bancroft Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancroft Fund Limited has no effect on the direction of Capital One i.e., Capital One and Bancroft Fund go up and down completely randomly.

Pair Corralation between Capital One and Bancroft Fund

Considering the 90-day investment horizon Capital One Financial is expected to generate 2.3 times more return on investment than Bancroft Fund. However, Capital One is 2.3 times more volatile than Bancroft Fund Limited. It trades about 0.01 of its potential returns per unit of risk. Bancroft Fund Limited is currently generating about -0.03 per unit of risk. If you would invest  17,740  in Capital One Financial on December 29, 2024 and sell it today you would earn a total of  75.00  from holding Capital One Financial or generate 0.42% return on investment over 90 days.

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

Capital One Financial  vs.  Bancroft Fund Limited

Capital One Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Capital One is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bancroft Fund Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bancroft Fund Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Bancroft Fund is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Capital One and Bancroft Fund

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

The idea behind Capital One Financial and Bancroft Fund Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.