Correlation Between Capital One and Ally Financial
Can any of the company-specific risk be diversified away by investing in both Capital One and Ally Financial 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 Ally Financial 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 Ally Financial, you can compare the effects of market volatilities on Capital One and Ally Financial 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 Ally Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Ally Financial.
Diversification Opportunities for Capital One and Ally Financial
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Capital and Ally is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Ally Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ally Financial 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 Ally Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ally Financial has no effect on the direction of Capital One i.e., Capital One and Ally Financial go up and down completely randomly.
Pair Corralation between Capital One and Ally Financial
Considering the 90-day investment horizon Capital One Financial is expected to generate 1.55 times more return on investment than Ally Financial. However, Capital One is 1.55 times more volatile than Ally Financial. It trades about 0.21 of its potential returns per unit of risk. Ally Financial is currently generating about 0.21 per unit of risk. If you would invest 16,075 in Capital One Financial on August 26, 2024 and sell it today you would earn a total of 2,631 from holding Capital One Financial or generate 16.37% 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. Ally Financial
Performance |
| Timeline |
| Capital One Financial |
| Ally Financial |
Capital One and Ally Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Ally Financial
The main advantage of trading using opposite Capital One and Ally Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Ally Financial 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 Ally Financial will offset losses from the drop in Ally Financial's long position.| Capital One vs. Mastercard | Capital One vs. Visa Class A | Capital One vs. PayPal Holdings | Capital One vs. Ally Financial |
| Ally Financial vs. American Express | Ally Financial vs. Mastercard | Ally Financial vs. Visa Class A | Ally Financial vs. PayPal Holdings |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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