Correlation Between Capital One and FirstCash

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

Diversification Opportunities for Capital One and FirstCash

-0.69

Correlation Coefficient

Capital One  FirstCash

Excellent diversification

The 3 months correlation between Capital and FirstCash is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and FirstCash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstCash 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 FirstCash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstCash has no effect on the direction of Capital One i.e., Capital One and FirstCash go up and down completely randomly.

Pair Corralation between Capital One and FirstCash

Considering the 90-day investment horizon Capital One Financial is expected to generate 1.23 times more return on investment than FirstCash. However, Capital One is 1.23 times more volatile than FirstCash. It trades about 0.08 of its potential returns per unit of risk. FirstCash is currently generating about 0.03 per unit of risk. If you would invest  8,910  in Capital One Financial on September 19, 2024 and sell it today you would earn a total of  8,534  from holding Capital One Financial or generate 95.78% return on investment over 90 days.

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

Capital One Financial  vs.  FirstCash

Capital One Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Capital One reported solid returns over the last few months and may actually be approaching a breakup point.

FirstCash

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FirstCash has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Capital One and FirstCash

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

The idea behind Capital One Financial and FirstCash 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.