Correlation Between GCM Grosvenor and Capital One

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

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

Diversification Opportunities for GCM Grosvenor and Capital One

0.71

Correlation Coefficient

GCM Grosvenor  Capital One

Poor diversification

The 3 months correlation between GCM and Capital is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding GCM Grosvenor 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 GCM Grosvenor 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 GCM Grosvenor 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 GCM Grosvenor i.e., GCM Grosvenor and Capital One go up and down completely randomly.

Pair Corralation between GCM Grosvenor and Capital One

Assuming the 90 days horizon GCM Grosvenor is expected to generate 4.11 times more return on investment than Capital One. However, GCM Grosvenor is 4.11 times more volatile than Capital One Financial. It trades about 0.14 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.01 per unit of risk. If you would invest  126.00  in GCM Grosvenor on December 28, 2024 and sell it today you would earn a total of  88.00  from holding GCM Grosvenor or generate 69.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

GCM Grosvenor  vs.  Capital One Financial

GCM Grosvenor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GCM Grosvenor are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, GCM Grosvenor showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with GCM Grosvenor and Capital One

The main advantage of trading using opposite GCM Grosvenor and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GCM Grosvenor 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 GCM Grosvenor 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.