Correlation Between STMicroelectronics and Capital One
Can any of the company-specific risk be diversified away by investing in both STMicroelectronics and Capital One 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 STMicroelectronics and Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STMicroelectronics NV and Capital One Financial, you can compare the effects of market volatilities on STMicroelectronics and Capital One 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 STMicroelectronics with a short position of Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of STMicroelectronics and Capital One.
Diversification Opportunities for STMicroelectronics and Capital One
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between STMicroelectronics and Capital is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding STMicroelectronics NV and Capital One Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital One Financial and STMicroelectronics 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 STMicroelectronics NV are associated (or correlated) with Capital One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital One Financial has no effect on the direction of STMicroelectronics i.e., STMicroelectronics and Capital One go up and down completely randomly.
Pair Corralation between STMicroelectronics and Capital One
Assuming the 90 days trading horizon STMicroelectronics NV is expected to under-perform the Capital One. In addition to that, STMicroelectronics is 1.22 times more volatile than Capital One Financial. It trades about -0.01 of its total potential returns per unit of risk. Capital One Financial is currently generating about 0.1 per unit of volatility. If you would invest 23,771 in Capital One Financial on September 4, 2024 and sell it today you would earn a total of 34,882 from holding Capital One Financial or generate 146.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 77.33% |
| Values | Daily Returns |
STMicroelectronics NV vs. Capital One Financial
Performance |
| Timeline |
| STMicroelectronics |
| Capital One Financial |
STMicroelectronics and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STMicroelectronics and Capital One
The main advantage of trading using opposite STMicroelectronics and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STMicroelectronics position performs unexpectedly, Capital One 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 Capital One will offset losses from the drop in Capital One's long position.The idea behind STMicroelectronics NV and Capital One Financial pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Capital One vs. Dell Technologies | Capital One vs. Planet Fitness | Capital One vs. Align Technology | Capital One vs. Raytheon Technologies |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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