Correlation Between Capital One and Charles Schwab
Can any of the company-specific risk be diversified away by investing in both Capital One and Charles Schwab 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 Charles Schwab 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 The Charles Schwab, you can compare the effects of market volatilities on Capital One and Charles Schwab 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 Charles Schwab. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Charles Schwab.
Diversification Opportunities for Capital One and Charles Schwab
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Capital and Charles is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and The Charles Schwab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charles Schwab 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 Charles Schwab. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charles Schwab has no effect on the direction of Capital One i.e., Capital One and Charles Schwab go up and down completely randomly.
Pair Corralation between Capital One and Charles Schwab
Assuming the 90 days trading horizon Capital One Financial is expected to generate 1.78 times more return on investment than Charles Schwab. However, Capital One is 1.78 times more volatile than The Charles Schwab. It trades about 0.28 of its potential returns per unit of risk. The Charles Schwab is currently generating about 0.41 per unit of risk. If you would invest 327,334 in Capital One Financial on September 2, 2024 and sell it today you would earn a total of 63,578 from holding Capital One Financial or generate 19.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. The Charles Schwab
Performance |
| Timeline |
| Capital One Financial |
| Charles Schwab |
Capital One and Charles Schwab Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Charles Schwab
The main advantage of trading using opposite Capital One and Charles Schwab positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Charles Schwab 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 Charles Schwab will offset losses from the drop in Charles Schwab's long position.| Capital One vs. Monster Beverage Corp | Capital One vs. UnitedHealth Group Incorporated | Capital One vs. Southwest Airlines | Capital One vs. Grupo Carso SAB |
| Charles Schwab vs. FibraHotel | Charles Schwab vs. Prudential Financial | Charles Schwab vs. Capital One Financial | Charles Schwab vs. Ameriprise Financial |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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