Correlation Between Capital One and Visa
Can any of the company-specific risk be diversified away by investing in both Capital One and Visa 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 Visa 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 Visa Class A, you can compare the effects of market volatilities on Capital One and Visa 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 Visa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Visa.
Diversification Opportunities for Capital One and Visa
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Capital and Visa is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Visa Class A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Class A 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Class A has no effect on the direction of Capital One i.e., Capital One and Visa go up and down completely randomly.
Pair Corralation between Capital One and Visa
Considering the 90-day investment horizon Capital One Financial is expected to generate 2.88 times more return on investment than Visa. However, Capital One is 2.88 times more volatile than Visa Class A. It trades about 0.19 of its potential returns per unit of risk. Visa Class A is currently generating about 0.27 per unit of risk. If you would invest 15,552 in Capital One Financial on August 23, 2024 and sell it today you would earn a total of 2,517 from holding Capital One Financial or generate 16.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital One Financial vs. Visa Class A
Performance |
| Timeline |
| Capital One Financial |
| Visa Class A |
Capital One and Visa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Visa
The main advantage of trading using opposite Capital One and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.| Capital One vs. Mastercard | Capital One vs. Visa Class A | Capital One vs. PayPal Holdings | Capital One vs. Ally Financial |
| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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