Correlation Between Capital Group and SSGA Active

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

By analyzing existing cross correlation between Capital Group Fixed and SSGA Active Trust, you can compare the effects of market volatilities on Capital Group and SSGA Active 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 SSGA Active. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Group and SSGA Active.

Diversification Opportunities for Capital Group and SSGA Active

0.97

Correlation Coefficient

Capital Group  SSGA Active

Almost no diversification

The 3 months correlation between Capital and SSGA is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Fixed and SSGA Active Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSGA Active 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 Fixed are associated (or correlated) with SSGA Active. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSGA Active Trust has no effect on the direction of Capital Group i.e., Capital Group and SSGA Active go up and down completely randomly.

Pair Corralation between Capital Group and SSGA Active

Given the investment horizon of 90 days Capital Group Fixed is expected to under-perform the SSGA Active. In addition to that, Capital Group is 1.16 times more volatile than SSGA Active Trust. It trades about -0.04 of its total potential returns per unit of risk. SSGA Active Trust is currently generating about -0.03 per unit of volatility. If you would invest  2,922  in SSGA Active Trust on December 28, 2024 and sell it today you would lose (12.00) from holding SSGA Active Trust or give up 0.41% of portfolio value over 90 days.

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

Capital Group Fixed  vs.  SSGA Active Trust

Capital Group Fixed

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Group Fixed has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Capital Group is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

SSGA Active Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days SSGA Active Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SSGA Active is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Capital Group and SSGA Active

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

The idea behind Capital Group Fixed and SSGA Active 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.