Correlation Between Capital Group and Exchange Traded

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

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

Diversification Opportunities for Capital Group and Exchange Traded

-0.75

Correlation Coefficient

Capital Group  Exchange Traded

Pay attention - limited upside

The 3 months correlation between Capital and Exchange is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Core and Exchange Traded Concepts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Traded Concepts 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 Core are associated (or correlated) with Exchange Traded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Traded Concepts has no effect on the direction of Capital Group i.e., Capital Group and Exchange Traded go up and down completely randomly.

Pair Corralation between Capital Group and Exchange Traded

If you would invest  3,293  in Capital Group Core on October 3, 2024 and sell it today you would earn a total of  215.00  from holding Capital Group Core or generate 6.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.19%
Values	Daily Returns

Capital Group Core  vs.  Exchange Traded Concepts

Capital Group Core

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Core are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Capital Group is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Exchange Traded Concepts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exchange Traded Concepts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Exchange Traded is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Capital Group and Exchange Traded

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

The idea behind Capital Group Core and Exchange Traded Concepts 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.