Correlation Between Carlyle and Capital One
Can any of the company-specific risk be diversified away by investing in both Carlyle 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 Carlyle and Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carlyle Group and Capital One Financial, you can compare the effects of market volatilities on Carlyle 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 Carlyle with a short position of Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlyle and Capital One.
Diversification Opportunities for Carlyle and Capital One
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Carlyle and Capital is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Carlyle Group 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 Carlyle 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 Carlyle Group 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 Carlyle i.e., Carlyle and Capital One go up and down completely randomly.
Pair Corralation between Carlyle and Capital One
Allowing for the 90-day total investment horizon Carlyle is expected to generate 1.21 times less return on investment than Capital One. But when comparing it to its historical volatility, Carlyle Group is 1.29 times less risky than Capital One. It trades about 0.22 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 14,925 in Capital One Financial on August 30, 2024 and sell it today you would earn a total of 4,204 from holding Capital One Financial or generate 28.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carlyle Group vs. Capital One Financial
Performance |
| Timeline |
| Carlyle Group |
| Capital One Financial |
Carlyle and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carlyle and Capital One
The main advantage of trading using opposite Carlyle and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlyle 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.The idea behind Carlyle Group 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.| Capital One vs. Mastercard | Capital One vs. Visa Class A | Capital One vs. PayPal Holdings | Capital One vs. Ally 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.
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