Correlation Between Stagwell and CAPITAL

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

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

Diversification Opportunities for Stagwell and CAPITAL

0.21

Correlation Coefficient

Stagwell  CAPITAL

Modest diversification

The 3 months correlation between Stagwell and CAPITAL is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Stagwell 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 Stagwell 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 Stagwell 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 Stagwell i.e., Stagwell and CAPITAL go up and down completely randomly.

Pair Corralation between Stagwell and CAPITAL

Given the investment horizon of 90 days Stagwell is expected to generate 3.08 times more return on investment than CAPITAL. However, Stagwell is 3.08 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 -0.04 per unit of risk. If you would invest  615.00  in Stagwell on October 25, 2024 and sell it today you would earn a total of  46.00  from holding Stagwell or generate 7.48% return on investment over 90 days.

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

Stagwell  vs.  CAPITAL ONE FINANCIAL

Stagwell

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stagwell are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Stagwell may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 Stagwell and CAPITAL

The main advantage of trading using opposite Stagwell and CAPITAL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stagwell 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 Stagwell 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.