Correlation Between Capital One and Merchants Bancorp
Can any of the company-specific risk be diversified away by investing in both Capital One and Merchants Bancorp 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 Merchants Bancorp 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 Merchants Bancorp, you can compare the effects of market volatilities on Capital One and Merchants Bancorp 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 Merchants Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Merchants Bancorp.
Diversification Opportunities for Capital One and Merchants Bancorp
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Capital and Merchants is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants Bancorp 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 Merchants Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants Bancorp has no effect on the direction of Capital One i.e., Capital One and Merchants Bancorp go up and down completely randomly.
Pair Corralation between Capital One and Merchants Bancorp
Considering the 90-day investment horizon Capital One is expected to generate 1.18 times less return on investment than Merchants Bancorp. But when comparing it to its historical volatility, Capital One Financial is 1.37 times less risky than Merchants Bancorp. It trades about 0.4 of its potential returns per unit of risk. Merchants Bancorp is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 3,600 in Merchants Bancorp on November 3, 2024 and sell it today you would earn a total of 593.00 from holding Merchants Bancorp or generate 16.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. Merchants Bancorp
Performance |
| Timeline |
| Capital One Financial |
| Merchants Bancorp |
Capital One and Merchants Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Merchants Bancorp
The main advantage of trading using opposite Capital One and Merchants Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Merchants Bancorp 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 Merchants Bancorp will offset losses from the drop in Merchants Bancorp's long position.| Capital One vs. Mastercard | Capital One vs. Visa Class A | Capital One vs. PayPal Holdings | Capital One vs. Ally Financial |
| Merchants Bancorp vs. RBB Bancorp | Merchants Bancorp vs. Midland States Bancorp | Merchants Bancorp vs. SmartFinancial, | Merchants Bancorp vs. Business First Bancshares |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |