Correlation Between Netcapital and Capital One

Can any of the company-specific risk be diversified away by investing in both Netcapital 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 Netcapital and Capital One into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Netcapital and Capital One Financial, you can compare the effects of market volatilities on Netcapital 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 Netcapital with a short position of Capital One. Check out your portfolio center. Please also check ongoing floating volatility patterns of Netcapital and Capital One.

Diversification Opportunities for Netcapital and Capital One

-0.41

Correlation Coefficient

Netcapital  Capital One

Very good diversification

The 3 months correlation between Netcapital and Capital is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Netcapital 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 Netcapital 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 Netcapital 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 Netcapital i.e., Netcapital and Capital One go up and down completely randomly.

Pair Corralation between Netcapital and Capital One

Given the investment horizon of 90 days Netcapital is expected to generate 6.23 times more return on investment than Capital One. However, Netcapital is 6.23 times more volatile than Capital One Financial. It trades about 0.01 of its potential returns per unit of risk. Capital One Financial is currently generating about 0.05 per unit of risk. If you would invest  15.00  in Netcapital on February 20, 2024 and sell it today you would lose (2.00) from holding Netcapital or give up 13.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Netcapital  vs.  Capital One Financial

Netcapital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Netcapital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Netcapital may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Capital One Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Capital One is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Netcapital and Capital One

The main advantage of trading using opposite Netcapital and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Netcapital 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 Netcapital 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.