Correlation Between FIRST REP and Capital One

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Can any of the company-specific risk be diversified away by investing in both FIRST REP 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 FIRST REP and Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FIRST REP BK and Capital One Financial, you can compare the effects of market volatilities on FIRST REP 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 FIRST REP with a short position of Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIRST REP and Capital One.

Diversification Opportunities for FIRST REP and Capital One

-0.77
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between FIRST and Capital is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding FIRST REP BK 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 FIRST REP 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 FIRST REP BK 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 FIRST REP i.e., FIRST REP and Capital One go up and down completely randomly.

Pair Corralation between FIRST REP and Capital One

Considering the 90-day investment horizon FIRST REP BK is expected to under-perform the Capital One. In addition to that, FIRST REP is 13.67 times more volatile than Capital One Financial. It trades about -0.36 of its total potential returns per unit of risk. Capital One Financial is currently generating about 0.11 per unit of volatility. If you would invest  9,419  in Capital One Financial on December 29, 2023 and sell it today you would earn a total of  5,032  from holding Capital One Financial or generate 53.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy9.27%
ValuesDaily Returns

FIRST REP BK  vs.  Capital One Financial

 Performance 
       Timeline  
FIRST REP BK 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days FIRST REP BK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, FIRST REP is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Capital One Financial 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Capital One may actually be approaching a critical reversion point that can send shares even higher in April 2024.

FIRST REP and Capital One Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FIRST REP and Capital One

The main advantage of trading using opposite FIRST REP and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIRST REP 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 FIRST REP BK 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.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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