Correlation Between Capital One and Valuence Merger

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

Diversification Opportunities for Capital One and Valuence Merger

-0.37

Correlation Coefficient

Capital One  Valuence Merger

Very good diversification

The 3 months correlation between Capital and Valuence is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Valuence Merger Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valuence Merger Corp 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 Valuence Merger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valuence Merger Corp has no effect on the direction of Capital One i.e., Capital One and Valuence Merger go up and down completely randomly.

Pair Corralation between Capital One and Valuence Merger

Considering the 90-day investment horizon Capital One Financial is expected to generate 0.28 times more return on investment than Valuence Merger. However, Capital One Financial is 3.6 times less risky than Valuence Merger. It trades about 0.18 of its potential returns per unit of risk. Valuence Merger Corp is currently generating about 0.0 per unit of risk. If you would invest  14,049  in Capital One Financial on September 15, 2024 and sell it today you would earn a total of  4,404  from holding Capital One Financial or generate 31.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	26.56%
Values	Daily Returns

Capital One Financial  vs.  Valuence Merger Corp

Capital One Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 13 (%) 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.

Valuence Merger Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valuence Merger Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Valuence Merger is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Capital One and Valuence Merger

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

The idea behind Capital One Financial and Valuence Merger Corp 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.