Correlation Between Capital Group and IShares Trust

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

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

Diversification Opportunities for Capital Group and IShares Trust

0.22

Correlation Coefficient

Capital Group  IShares Trust

Modest diversification

The 3 months correlation between Capital and IShares is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Conservative and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and Capital Group 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 Group Conservative are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Capital Group i.e., Capital Group and IShares Trust go up and down completely randomly.

Pair Corralation between Capital Group and IShares Trust

Given the investment horizon of 90 days Capital Group Conservative is expected to generate 0.47 times more return on investment than IShares Trust. However, Capital Group Conservative is 2.13 times less risky than IShares Trust. It trades about 0.03 of its potential returns per unit of risk. iShares Trust is currently generating about -0.13 per unit of risk. If you would invest  2,670  in Capital Group Conservative on December 21, 2024 and sell it today you would earn a total of  33.00  from holding Capital Group Conservative or generate 1.24% return on investment over 90 days.

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

Capital Group Conservative  vs.  iShares Trust

Capital Group Conser

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Conservative are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Capital Group is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

iShares Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Capital Group and IShares Trust

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

The idea behind Capital Group Conservative and iShares Trust 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.