Correlation Between Capital Group and FT Vest

Can any of the company-specific risk be diversified away by investing in both Capital Group and FT Vest 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 FT Vest 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 FT Vest Equity, you can compare the effects of market volatilities on Capital Group and FT Vest 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 FT Vest. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Group and FT Vest.

Diversification Opportunities for Capital Group and FT Vest

0.9

Correlation Coefficient

Capital Group  FT Vest

Almost no diversification

The 3 months correlation between Capital and DHDG is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Core and FT Vest Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FT Vest Equity 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 FT Vest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FT Vest Equity has no effect on the direction of Capital Group i.e., Capital Group and FT Vest go up and down completely randomly.

Pair Corralation between Capital Group and FT Vest

Given the investment horizon of 90 days Capital Group Core is expected to generate 1.67 times more return on investment than FT Vest. However, Capital Group is 1.67 times more volatile than FT Vest Equity. It trades about 0.11 of its potential returns per unit of risk. FT Vest Equity is currently generating about 0.02 per unit of risk. If you would invest  2,289  in Capital Group Core on October 4, 2024 and sell it today you would earn a total of  1,201  from holding Capital Group Core or generate 52.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	10.48%
Values	Daily Returns

Capital Group Core  vs.  FT Vest Equity

Capital Group Core

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Core are ranked lower than 3 (%) 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.

FT Vest Equity

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Capital Group and FT Vest

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

The idea behind Capital Group Core and FT Vest Equity 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 Transaction History module to view history of all your transactions and understand their impact on performance.