Correlation Between Capital One and Thunder Bridge

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

Diversification Opportunities for Capital One and Thunder Bridge

0.29

Correlation Coefficient

Capital One  Thunder Bridge

Modest diversification

The 3 months correlation between Capital and Thunder is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Thunder Bridge Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunder Bridge Capital 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 Thunder Bridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunder Bridge Capital has no effect on the direction of Capital One i.e., Capital One and Thunder Bridge go up and down completely randomly.

Pair Corralation between Capital One and Thunder Bridge

Considering the 90-day investment horizon Capital One is expected to generate 1.18 times less return on investment than Thunder Bridge. But when comparing it to its historical volatility, Capital One Financial is 1.27 times less risky than Thunder Bridge. It trades about 0.15 of its potential returns per unit of risk. Thunder Bridge Capital is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,060  in Thunder Bridge Capital on October 23, 2024 and sell it today you would earn a total of  164.00  from holding Thunder Bridge Capital or generate 15.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	58.33%
Values	Daily Returns

Capital One Financial  vs.  Thunder Bridge Capital

Capital One Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 11 (%) 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.

Thunder Bridge Capital

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Thunder Bridge Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively uncertain fundamental indicators, Thunder Bridge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital One and Thunder Bridge

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

The idea behind Capital One Financial and Thunder Bridge Capital 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.