Correlation Between Equitable Holdings and Capital One

Can any of the company-specific risk be diversified away by investing in both Equitable Holdings and Capital One 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 Equitable Holdings and Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Equitable Holdings and Capital One Financial, you can compare the effects of market volatilities on Equitable Holdings and Capital One 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 Equitable Holdings with a short position of Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equitable Holdings and Capital One.

Diversification Opportunities for Equitable Holdings and Capital One

0.73

Correlation Coefficient

Equitable Holdings  Capital One

Poor diversification

The 3 months correlation between Equitable and Capital is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Equitable Holdings and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial and Equitable Holdings 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 Equitable Holdings are associated (or correlated) with Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of Equitable Holdings i.e., Equitable Holdings and Capital One go up and down completely randomly.

Pair Corralation between Equitable Holdings and Capital One

Assuming the 90 days trading horizon Equitable Holdings is expected to generate 7.14 times less return on investment than Capital One. But when comparing it to its historical volatility, Equitable Holdings is 1.08 times less risky than Capital One. It trades about 0.02 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,865  in Capital One Financial on December 24, 2024 and sell it today you would earn a total of  138.00  from holding Capital One Financial or generate 7.4% return on investment over 90 days.

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

Equitable Holdings  vs.  Capital One Financial

Equitable Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equitable Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Equitable Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Capital One Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly sluggish technical and fundamental indicators, Capital One may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Equitable Holdings and Capital One

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

The idea behind Equitable Holdings and Capital One Financial 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.