Correlation Between Capital One and Medallion Bank
Can any of the company-specific risk be diversified away by investing in both Capital One and Medallion Bank 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 Medallion Bank 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 Medallion Bank PR, you can compare the effects of market volatilities on Capital One and Medallion Bank 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 Medallion Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Medallion Bank.
Diversification Opportunities for Capital One and Medallion Bank
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Capital and Medallion is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Medallion Bank PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medallion Bank PR 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 Medallion Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medallion Bank PR has no effect on the direction of Capital One i.e., Capital One and Medallion Bank go up and down completely randomly.
Pair Corralation between Capital One and Medallion Bank
Assuming the 90 days trading horizon Capital One Financial is expected to under-perform the Medallion Bank. But the preferred stock apears to be less risky and, when comparing its historical volatility, Capital One Financial is 1.23 times less risky than Medallion Bank. The preferred stock trades about -0.09 of its potential returns per unit of risk. The Medallion Bank PR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,570 in Medallion Bank PR on August 24, 2024 and sell it today you would earn a total of 66.00 from holding Medallion Bank PR or generate 2.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. Medallion Bank PR
Performance |
| Timeline |
| Capital One Financial |
| Medallion Bank PR |
Capital One and Medallion Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Medallion Bank
The main advantage of trading using opposite Capital One and Medallion Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Medallion Bank 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 Medallion Bank will offset losses from the drop in Medallion Bank's long position.| Capital One vs. Capital One Financial | Capital One vs. Wells Fargo | Capital One vs. Bank of America | Capital One vs. Capital One Financial |
| Medallion Bank vs. Merchants Bancorp | Medallion Bank vs. Medalist Diversified Reit | Medallion Bank vs. Northern Trust | Medallion Bank vs. First Citizens BancShares |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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