Correlation Between Capital One and GP Investments
Can any of the company-specific risk be diversified away by investing in both Capital One and GP Investments 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 One and GP Investments 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 GP Investments, you can compare the effects of market volatilities on Capital One and GP Investments 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 One with a short position of GP Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and GP Investments.
Diversification Opportunities for Capital One and GP Investments
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Capital and GPIV33 is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and GP Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GP Investments and Capital One 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 GP Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GP Investments has no effect on the direction of Capital One i.e., Capital One and GP Investments go up and down completely randomly.
Pair Corralation between Capital One and GP Investments
Assuming the 90 days trading horizon Capital One Financial is expected to generate 0.79 times more return on investment than GP Investments. However, Capital One Financial is 1.26 times less risky than GP Investments. It trades about 0.3 of its potential returns per unit of risk. GP Investments is currently generating about -0.17 per unit of risk. If you would invest 39,860 in Capital One Financial on August 30, 2024 and sell it today you would earn a total of 16,868 from holding Capital One Financial or generate 42.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. GP Investments
Performance |
| Timeline |
| Capital One Financial |
| GP Investments |
Capital One and GP Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and GP Investments
The main advantage of trading using opposite Capital One and GP Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, GP Investments 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 GP Investments will offset losses from the drop in GP Investments' long position.| Capital One vs. Mastercard Incorporated | Capital One vs. Credit Acceptance | Capital One vs. Financeira Alfa SA |
| GP Investments vs. Ross Stores | GP Investments vs. Paycom Software | GP Investments vs. MAHLE Metal Leve | GP Investments vs. Bio Techne |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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