Correlation Between Sphere Entertainment and CAPITAL

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

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

Diversification Opportunities for Sphere Entertainment and CAPITAL

0.35

Correlation Coefficient

Sphere Entertainment  CAPITAL

Weak diversification

The 3 months correlation between Sphere and CAPITAL is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co 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 Sphere Entertainment 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 Sphere Entertainment Co 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 FINANCIAL has no effect on the direction of Sphere Entertainment i.e., Sphere Entertainment and CAPITAL go up and down completely randomly.

Pair Corralation between Sphere Entertainment and CAPITAL

Given the investment horizon of 90 days Sphere Entertainment Co is expected to generate 7.68 times more return on investment than CAPITAL. However, Sphere Entertainment is 7.68 times more volatile than CAPITAL ONE FINANCIAL. It trades about 0.06 of its potential returns per unit of risk. CAPITAL ONE FINANCIAL is currently generating about 0.0 per unit of risk. If you would invest  2,237  in Sphere Entertainment Co on October 9, 2024 and sell it today you would earn a total of  2,069  from holding Sphere Entertainment Co or generate 92.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.39%
Values	Daily Returns

Sphere Entertainment Co  vs.  CAPITAL ONE FINANCIAL

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

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. Despite somewhat strong basic indicators, CAPITAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sphere Entertainment and CAPITAL

The main advantage of trading using opposite Sphere Entertainment and CAPITAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sphere Entertainment 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 Sphere Entertainment Co 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.