Correlation Between CAPITAL and Sphere Entertainment

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

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

Diversification Opportunities for CAPITAL and Sphere Entertainment

0.0

Correlation Coefficient

CAPITAL  Sphere Entertainment

Pay attention - limited upside

The 3 months correlation between CAPITAL and Sphere is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding CAPITAL ONE FINANCIAL and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment and CAPITAL 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 CAPITAL ONE FINANCIAL are associated (or correlated) with Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of CAPITAL i.e., CAPITAL and Sphere Entertainment go up and down completely randomly.

Pair Corralation between CAPITAL and Sphere Entertainment

Assuming the 90 days trading horizon CAPITAL ONE FINANCIAL is expected to under-perform the Sphere Entertainment. But the bond apears to be less risky and, when comparing its historical volatility, CAPITAL ONE FINANCIAL is 3.5 times less risky than Sphere Entertainment. The bond trades about -0.13 of its potential returns per unit of risk. The Sphere Entertainment Co is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  4,404  in Sphere Entertainment Co on October 24, 2024 and sell it today you would lose (265.00) from holding Sphere Entertainment Co or give up 6.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

CAPITAL ONE FINANCIAL  vs.  Sphere Entertainment Co

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 latest stock price disturbance, may contribute to short-term losses for the investors.

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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CAPITAL and Sphere Entertainment

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

The idea behind CAPITAL ONE FINANCIAL and Sphere Entertainment Co 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.