Correlation Between China Lending and Capital One

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

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

Diversification Opportunities for China Lending and Capital One

-0.52

Correlation Coefficient

China Lending  Capital One

Excellent diversification

The 3 months correlation between China and Capital is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding China Lending 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 China Lending 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 China Lending 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 China Lending i.e., China Lending and Capital One go up and down completely randomly.

Pair Corralation between China Lending and Capital One

If you would invest  1,734  in Capital One Financial on June 22, 2024 and sell it today you would earn a total of  199.00  from holding Capital One Financial or generate 11.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.8%
Values	Daily Returns

China Lending Corp  vs.  Capital One Financial

China Lending Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Lending Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, China Lending is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Capital One Financial

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital One Financial are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very sluggish technical and fundamental indicators, Capital One displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Lending and Capital One

The main advantage of trading using opposite China Lending and Capital One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Lending 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 China Lending 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.