Correlation Between Capital Group and Vanguard Large

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

Diversification Opportunities for Capital Group and Vanguard Large

0.98

Correlation Coefficient

Capital Group  Vanguard Large

Almost no diversification

The 3 months correlation between Capital and Vanguard is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Core and Vanguard Large Cap Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Large Cap 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 Vanguard Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Large Cap has no effect on the direction of Capital Group i.e., Capital Group and Vanguard Large go up and down completely randomly.

Pair Corralation between Capital Group and Vanguard Large

Given the investment horizon of 90 days Capital Group is expected to generate 1.0 times less return on investment than Vanguard Large. But when comparing it to its historical volatility, Capital Group Core is 1.04 times less risky than Vanguard Large. It trades about 0.14 of its potential returns per unit of risk. Vanguard Large Cap Index is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  20,586  in Vanguard Large Cap Index on September 23, 2024 and sell it today you would earn a total of  6,732  from holding Vanguard Large Cap Index or generate 32.7% return on investment over 90 days.

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

Capital Group Core  vs.  Vanguard Large Cap Index

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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard Large Cap

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Large Cap Index are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Vanguard Large is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Capital Group and Vanguard Large

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

The idea behind Capital Group Core and Vanguard Large Cap Index 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.