Correlation Between Great Ajax and Capital One

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

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

Diversification Opportunities for Great Ajax and Capital One

-0.62

Correlation Coefficient

Great Ajax  Capital One

Excellent diversification

The 3 months correlation between Great and Capital is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Great Ajax Corp 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 Great Ajax 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 Great Ajax Corp 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 Great Ajax i.e., Great Ajax and Capital One go up and down completely randomly.

Pair Corralation between Great Ajax and Capital One

Considering the 90-day investment horizon Great Ajax Corp is expected to under-perform the Capital One. In addition to that, Great Ajax is 2.08 times more volatile than Capital One Financial. It trades about -0.02 of its total potential returns per unit of risk. Capital One Financial is currently generating about 0.01 per unit of volatility. If you would invest  14,213  in Capital One Financial on February 4, 2024 and sell it today you would earn a total of  28.00  from holding Capital One Financial or generate 0.2% return on investment over 90 days.

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

Great Ajax Corp  vs.  Capital One Financial

Great Ajax Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Ajax Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward-looking indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Capital One Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 5 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Great Ajax and Capital One

The main advantage of trading using opposite Great Ajax and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Ajax 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 Great Ajax Corp 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 Global Correlations module to find global opportunities by holding instruments from different markets.