Correlation Between Capital One and Bny Mellon

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

Diversification Opportunities for Capital One and Bny Mellon

0.13

Correlation Coefficient

Capital One  Bny Mellon

Average diversification

The 3 months correlation between Capital and Bny is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Bny Mellon Municipalome in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bny Mellon Municipalome 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 Bny Mellon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bny Mellon Municipalome has no effect on the direction of Capital One i.e., Capital One and Bny Mellon go up and down completely randomly.

Pair Corralation between Capital One and Bny Mellon

Considering the 90-day investment horizon Capital One Financial is expected to generate 3.04 times more return on investment than Bny Mellon. However, Capital One is 3.04 times more volatile than Bny Mellon Municipalome. It trades about 0.1 of its potential returns per unit of risk. Bny Mellon Municipalome is currently generating about 0.06 per unit of risk. If you would invest  8,990  in Capital One Financial on December 2, 2024 and sell it today you would earn a total of  11,065  from holding Capital One Financial or generate 123.08% 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.  Bny Mellon Municipalome

Capital One Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Capital One may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Bny Mellon Municipalome

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bny Mellon Municipalome has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Bny Mellon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Capital One and Bny Mellon

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

The idea behind Capital One Financial and Bny Mellon Municipalome 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..