Correlation Between Capital One and CaliberCos

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

Diversification Opportunities for Capital One and CaliberCos

-0.58

Correlation Coefficient

Capital One  CaliberCos

Excellent diversification

The 3 months correlation between Capital and CaliberCos is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and CaliberCos Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CaliberCos Class A 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 CaliberCos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CaliberCos Class A has no effect on the direction of Capital One i.e., Capital One and CaliberCos go up and down completely randomly.

Pair Corralation between Capital One and CaliberCos

Considering the 90-day investment horizon Capital One Financial is expected to generate 0.36 times more return on investment than CaliberCos. However, Capital One Financial is 2.75 times less risky than CaliberCos. It trades about 0.08 of its potential returns per unit of risk. CaliberCos Class A is currently generating about -0.07 per unit of risk. If you would invest  9,414  in Capital One Financial on October 10, 2024 and sell it today you would earn a total of  8,775  from holding Capital One Financial or generate 93.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	83.47%
Values	Daily Returns

Capital One Financial  vs.  CaliberCos Class A

Capital One Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Capital One reported solid returns over the last few months and may actually be approaching a breakup point.

CaliberCos Class A

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CaliberCos Class A are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, CaliberCos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital One and CaliberCos

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

The idea behind Capital One Financial and CaliberCos Class A 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.