Correlation Between Valley National and Capital One
Can any of the company-specific risk be diversified away by investing in both Valley National 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 Valley National and Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valley National Bancorp and Capital One Financial, you can compare the effects of market volatilities on Valley National 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 Valley National with a short position of Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valley National and Capital One.
Diversification Opportunities for Valley National and Capital One
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Valley and Capital is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Valley National Bancorp 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 Valley National 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 Valley National Bancorp 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 Valley National i.e., Valley National and Capital One go up and down completely randomly.
Pair Corralation between Valley National and Capital One
Assuming the 90 days horizon Valley National Bancorp is expected to generate 0.64 times more return on investment than Capital One. However, Valley National Bancorp is 1.56 times less risky than Capital One. It trades about 0.03 of its potential returns per unit of risk. Capital One Financial is currently generating about -0.04 per unit of risk. If you would invest 2,520 in Valley National Bancorp on August 27, 2024 and sell it today you would earn a total of 10.00 from holding Valley National Bancorp or generate 0.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valley National Bancorp vs. Capital One Financial
Performance |
| Timeline |
| Valley National Bancorp |
| Capital One Financial |
Valley National and Capital One Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valley National and Capital One
The main advantage of trading using opposite Valley National and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valley National 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.| Valley National vs. Washington Federal | Valley National vs. US Bancorp PERP | Valley National vs. Merchants Marine Bancorp | Valley National vs. US Bancorp |
| Capital One vs. Capital One Financial | Capital One vs. Bank of America | Capital One vs. Wells Fargo | Capital One vs. Bank of America |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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