Correlation Between Capital One and Selective Insurance

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

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

Diversification Opportunities for Capital One and Selective Insurance

0.76

Correlation Coefficient

Capital One  Selective Insurance

Poor diversification

The 3 months correlation between Capital and Selective is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Selective Insurance Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Selective Insurance and Capital One 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 Capital One Financial are associated (or correlated) with Selective Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Selective Insurance has no effect on the direction of Capital One i.e., Capital One and Selective Insurance go up and down completely randomly.

Pair Corralation between Capital One and Selective Insurance

Assuming the 90 days trading horizon Capital One Financial is expected to generate 1.0 times more return on investment than Selective Insurance. However, Capital One is 1.0 times more volatile than Selective Insurance Group. It trades about 0.16 of its potential returns per unit of risk. Selective Insurance Group is currently generating about 0.12 per unit of risk. If you would invest  1,867  in Capital One Financial on May 16, 2025 and sell it today you would earn a total of  133.00  from holding Capital One Financial or generate 7.12% return on investment over 90 days.

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

Capital One Financial  vs.  Selective Insurance Group

Capital One Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly sluggish technical and fundamental indicators, Capital One may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Selective Insurance

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Selective Insurance Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Selective Insurance is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Capital One and Selective Insurance

The main advantage of trading using opposite Capital One and Selective Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital One position performs unexpectedly, Selective Insurance 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 Selective Insurance will offset losses from the drop in Selective Insurance's long position.

The idea behind Capital One Financial and Selective Insurance Group 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.