Correlation Between Capital One and JetBlue Airways
Can any of the company-specific risk be diversified away by investing in both Capital One and JetBlue Airways 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 JetBlue Airways 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 JetBlue Airways, you can compare the effects of market volatilities on Capital One and JetBlue Airways 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 JetBlue Airways. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and JetBlue Airways.
Diversification Opportunities for Capital One and JetBlue Airways
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and JetBlue is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and JetBlue Airways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JetBlue Airways 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 JetBlue Airways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JetBlue Airways has no effect on the direction of Capital One i.e., Capital One and JetBlue Airways go up and down completely randomly.
Pair Corralation between Capital One and JetBlue Airways
Assuming the 90 days trading horizon Capital One Financial is expected to generate 0.48 times more return on investment than JetBlue Airways. However, Capital One Financial is 2.08 times less risky than JetBlue Airways. It trades about 0.11 of its potential returns per unit of risk. JetBlue Airways is currently generating about 0.02 per unit of risk. If you would invest 188,558 in Capital One Financial on August 31, 2024 and sell it today you would earn a total of 202,354 from holding Capital One Financial or generate 107.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.73% |
| Values | Daily Returns |
Capital One Financial vs. JetBlue Airways
Performance |
| Timeline |
| Capital One Financial |
| JetBlue Airways |
Capital One and JetBlue Airways Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and JetBlue Airways
The main advantage of trading using opposite Capital One and JetBlue Airways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, JetBlue Airways 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 JetBlue Airways will offset losses from the drop in JetBlue Airways' long position.| Capital One vs. Applied Materials | Capital One vs. FibraHotel | Capital One vs. Grupo Carso SAB | Capital One vs. Verizon Communications |
| JetBlue Airways vs. McEwen Mining | JetBlue Airways vs. Verizon Communications | JetBlue Airways vs. Applied Materials | JetBlue Airways vs. Grupo Sports World |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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