Correlation Between Capital One and OppFi

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

Diversification Opportunities for Capital One and OppFi

0.75

Correlation Coefficient

Capital One  OppFi

Poor diversification

The 3 months correlation between Capital and OppFi is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and OppFi Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OppFi Inc 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 OppFi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OppFi Inc has no effect on the direction of Capital One i.e., Capital One and OppFi go up and down completely randomly.

Pair Corralation between Capital One and OppFi

Considering the 90-day investment horizon Capital One is expected to generate 16.54 times less return on investment than OppFi. But when comparing it to its historical volatility, Capital One Financial is 2.68 times less risky than OppFi. It trades about 0.01 of its potential returns per unit of risk. OppFi Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  756.00  in OppFi Inc on December 28, 2024 and sell it today you would earn a total of  176.00  from holding OppFi Inc or generate 23.28% 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.  OppFi Inc

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.

OppFi Inc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OppFi Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, OppFi demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital One and OppFi

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

The idea behind Capital One Financial and OppFi Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.