Correlation Between IShares MSCI and Capital Group

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

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

Diversification Opportunities for IShares MSCI and Capital Group

0.74

Correlation Coefficient

IShares MSCI  Capital Group

Poor diversification

The 3 months correlation between IShares and Capital is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares MSCI ACWI and Capital Group Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Global and IShares MSCI 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 iShares MSCI ACWI are associated (or correlated) with Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Global has no effect on the direction of IShares MSCI i.e., IShares MSCI and Capital Group go up and down completely randomly.

Pair Corralation between IShares MSCI and Capital Group

Given the investment horizon of 90 days IShares MSCI is expected to generate 20.35 times less return on investment than Capital Group. In addition to that, IShares MSCI is 1.1 times more volatile than Capital Group Global. It trades about 0.0 of its total potential returns per unit of risk. Capital Group Global is currently generating about 0.06 per unit of volatility. If you would invest  2,575  in Capital Group Global on December 21, 2024 and sell it today you would earn a total of  68.00  from holding Capital Group Global or generate 2.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

iShares MSCI ACWI  vs.  Capital Group Global

iShares MSCI ACWI

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares MSCI ACWI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IShares MSCI is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Capital Group Global

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Global are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Capital Group is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with IShares MSCI and Capital Group

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

The idea behind iShares MSCI ACWI and Capital Group Global 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.