Correlation Between Old Market and Capital One

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

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

Diversification Opportunities for Old Market and Capital One

0.64

Correlation Coefficient

Old Market  Capital One

Poor diversification

The 3 months correlation between Old and Capital is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Old Market Capital 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 Old Market 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 Old Market Capital 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 Old Market i.e., Old Market and Capital One go up and down completely randomly.

Pair Corralation between Old Market and Capital One

Given the investment horizon of 90 days Old Market Capital is expected to generate 2.05 times more return on investment than Capital One. However, Old Market is 2.05 times more volatile than Capital One Financial. It trades about 0.01 of its potential returns per unit of risk. Capital One Financial is currently generating about -0.11 per unit of risk. If you would invest  610.00  in Old Market Capital on September 14, 2024 and sell it today you would lose (1.00) from holding Old Market Capital or give up 0.16% of portfolio value over 90 days.

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

Old Market Capital  vs.  Capital One Financial

Old Market Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Old Market Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Old Market 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

0 of 100

Very Weak

Over the last 90 days Capital One Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Preferred Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Old Market and Capital One

The main advantage of trading using opposite Old Market and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Old Market 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 Old Market Capital 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.