Correlation Between Federal Agricultural and Capital One
Can any of the company-specific risk be diversified away by investing in both Federal Agricultural 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 Federal Agricultural and Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Federal Agricultural Mortgage and Capital One Financial, you can compare the effects of market volatilities on Federal Agricultural 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 Federal Agricultural with a short position of Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Federal Agricultural and Capital One.
Diversification Opportunities for Federal Agricultural and Capital One
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Federal and Capital is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Federal Agricultural Mortgage 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 Federal Agricultural 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 Federal Agricultural Mortgage 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 Federal Agricultural i.e., Federal Agricultural and Capital One go up and down completely randomly.
Pair Corralation between Federal Agricultural and Capital One
Assuming the 90 days trading horizon Federal Agricultural is expected to generate 2.18 times less return on investment than Capital One. But when comparing it to its historical volatility, Federal Agricultural Mortgage is 1.37 times less risky than Capital One. It trades about 0.04 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,544 in Capital One Financial on September 3, 2024 and sell it today you would earn a total of 322.00 from holding Capital One Financial or generate 20.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Federal Agricultural Mortgage vs. Capital One Financial
Performance |
| Timeline |
| Federal Agricultural |
| Capital One Financial |
Federal Agricultural and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Federal Agricultural and Capital One
The main advantage of trading using opposite Federal Agricultural and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Federal Agricultural 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.| Federal Agricultural vs. Capital One Financial | Federal Agricultural vs. Capital One Financial | Federal Agricultural vs. Citizens Financial Group | Federal Agricultural vs. Wells Fargo |
| Capital One vs. Capital One Financial | Capital One vs. Capital One Financial | Capital One vs. Capital One Financial | Capital One vs. Capital One Financial |
Check out your portfolio center.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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
Other Complementary Tools
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |