Correlation Between HNI Corp and CAPITAL

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

By analyzing existing cross correlation between HNI Corp and CAPITAL ONE FINL, you can compare the effects of market volatilities on HNI Corp and CAPITAL 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 HNI Corp with a short position of CAPITAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNI Corp and CAPITAL.

Diversification Opportunities for HNI Corp and CAPITAL

0.6

Correlation Coefficient

HNI Corp  CAPITAL

Poor diversification

The 3 months correlation between HNI and CAPITAL is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding HNI Corp and CAPITAL ONE FINL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAPITAL ONE FINL and HNI Corp 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 HNI Corp are associated (or correlated) with CAPITAL. 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 FINL has no effect on the direction of HNI Corp i.e., HNI Corp and CAPITAL go up and down completely randomly.

Pair Corralation between HNI Corp and CAPITAL

Considering the 90-day investment horizon HNI Corp is expected to generate 2.95 times more return on investment than CAPITAL. However, HNI Corp is 2.95 times more volatile than CAPITAL ONE FINL. It trades about 0.0 of its potential returns per unit of risk. CAPITAL ONE FINL is currently generating about -0.03 per unit of risk. If you would invest  5,135  in HNI Corp on October 25, 2024 and sell it today you would lose (39.50) from holding HNI Corp or give up 0.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

HNI Corp  vs.  CAPITAL ONE FINL

HNI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, HNI Corp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

CAPITAL ONE FINL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAPITAL ONE FINL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CAPITAL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HNI Corp and CAPITAL

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

The idea behind HNI Corp and CAPITAL ONE FINL 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.