Correlation Between Capital One and Washington Federal
Can any of the company-specific risk be diversified away by investing in both Capital One and Washington Federal 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 Washington Federal 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 Washington Federal, you can compare the effects of market volatilities on Capital One and Washington Federal 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 Washington Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Washington Federal.
Diversification Opportunities for Capital One and Washington Federal
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and Washington is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Washington Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Federal 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 Washington Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Federal has no effect on the direction of Capital One i.e., Capital One and Washington Federal go up and down completely randomly.
Pair Corralation between Capital One and Washington Federal
Assuming the 90 days trading horizon Capital One Financial is expected to generate 0.81 times more return on investment than Washington Federal. However, Capital One Financial is 1.24 times less risky than Washington Federal. It trades about -0.04 of its potential returns per unit of risk. Washington Federal is currently generating about -0.18 per unit of risk. If you would invest 1,959 in Capital One Financial on August 27, 2024 and sell it today you would lose (18.00) from holding Capital One Financial or give up 0.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. Washington Federal
Performance |
| Timeline |
| Capital One Financial |
| Washington Federal |
Capital One and Washington Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Washington Federal
The main advantage of trading using opposite Capital One and Washington Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Washington Federal 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 Washington Federal will offset losses from the drop in Washington Federal'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 |
| Washington Federal vs. Capital One Financial | Washington Federal vs. Capital One Financial | Washington Federal vs. Bank of America |
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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