Correlation Between Capital One and FedEx
Can any of the company-specific risk be diversified away by investing in both Capital One and FedEx 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 FedEx 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 FedEx, you can compare the effects of market volatilities on Capital One and FedEx 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 FedEx. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and FedEx.
Diversification Opportunities for Capital One and FedEx
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and FedEx is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and FedEx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FedEx 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 FedEx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FedEx has no effect on the direction of Capital One i.e., Capital One and FedEx go up and down completely randomly.
Pair Corralation between Capital One and FedEx
Assuming the 90 days trading horizon Capital One Financial is expected to generate 2.31 times more return on investment than FedEx. However, Capital One is 2.31 times more volatile than FedEx. It trades about 0.23 of its potential returns per unit of risk. FedEx is currently generating about 0.33 per unit of risk. If you would invest 336,754 in Capital One Financial on September 1, 2024 and sell it today you would earn a total of 54,158 from holding Capital One Financial or generate 16.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. FedEx
Performance |
| Timeline |
| Capital One Financial |
| FedEx |
Capital One and FedEx Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and FedEx
The main advantage of trading using opposite Capital One and FedEx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, FedEx 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 FedEx will offset losses from the drop in FedEx's long position.| Capital One vs. Ross Stores | Capital One vs. Grupo Sports World | Capital One vs. Prudential Financial | Capital One vs. Deutsche Bank Aktiengesellschaft |
| FedEx vs. Genworth Financial | FedEx vs. Grupo Sports World | FedEx vs. Capital One Financial | FedEx vs. Monster Beverage Corp |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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