Correlation Between Capital One and NetEase
Can any of the company-specific risk be diversified away by investing in both Capital One and NetEase 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 NetEase 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 NetEase, you can compare the effects of market volatilities on Capital One and NetEase 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 NetEase. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and NetEase.
Diversification Opportunities for Capital One and NetEase
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Capital and NetEase is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and NetEase in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetEase 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 NetEase. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetEase has no effect on the direction of Capital One i.e., Capital One and NetEase go up and down completely randomly.
Pair Corralation between Capital One and NetEase
Assuming the 90 days trading horizon Capital One Financial is expected to generate 14.41 times more return on investment than NetEase. However, Capital One is 14.41 times more volatile than NetEase. It trades about 0.06 of its potential returns per unit of risk. NetEase is currently generating about 0.22 per unit of risk. If you would invest 372,475 in Capital One Financial on September 12, 2024 and sell it today you would earn a total of 6,977 from holding Capital One Financial or generate 1.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. NetEase
Performance |
| Timeline |
| Capital One Financial |
| NetEase |
Capital One and NetEase Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and NetEase
The main advantage of trading using opposite Capital One and NetEase positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, NetEase 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 NetEase will offset losses from the drop in NetEase's long position.| Capital One vs. Financiera Independencia SAB | Capital One vs. The Select Sector | Capital One vs. Promotora y Operadora | Capital One vs. iShares Global Timber |
| NetEase vs. Lloyds Banking Group | NetEase vs. McEwen Mining | NetEase vs. Capital One Financial | NetEase vs. DXC Technology |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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