Correlation Between Capital One and Mini Dow
Can any of the company-specific risk be diversified away by investing in both Capital One and Mini Dow 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 Mini Dow 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 Mini Dow Jones, you can compare the effects of market volatilities on Capital One and Mini Dow 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 Mini Dow. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital One and Mini Dow.
Diversification Opportunities for Capital One and Mini Dow
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Capital and Mini is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Mini Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mini Dow Jones 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 Mini Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mini Dow Jones has no effect on the direction of Capital One i.e., Capital One and Mini Dow go up and down completely randomly.
Pair Corralation between Capital One and Mini Dow
Considering the 90-day investment horizon Capital One Financial is expected to generate 3.54 times more return on investment than Mini Dow. However, Capital One is 3.54 times more volatile than Mini Dow Jones. It trades about 0.2 of its potential returns per unit of risk. Mini Dow Jones is currently generating about 0.12 per unit of risk. If you would invest 14,687 in Capital One Financial on August 25, 2024 and sell it today you would earn a total of 4,019 from holding Capital One Financial or generate 27.36% 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. Mini Dow Jones
Performance |
| Timeline |
| Capital One Financial |
| Mini Dow Jones |
Capital One and Mini Dow Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital One and Mini Dow
The main advantage of trading using opposite Capital One and Mini Dow positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Mini Dow 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 Mini Dow will offset losses from the drop in Mini Dow's long position.| Capital One vs. Mastercard | Capital One vs. Visa Class A | Capital One vs. PayPal Holdings | Capital One vs. Ally 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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