Correlation Between Capital Group and WisdomTree Global

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

By analyzing existing cross correlation between Capital Group International and WisdomTree Global ex US, you can compare the effects of market volatilities on Capital Group and WisdomTree Global 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 WisdomTree Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Group and WisdomTree Global.

Diversification Opportunities for Capital Group and WisdomTree Global

0.96

Correlation Coefficient

Capital Group  WisdomTree Global

Almost no diversification

The 3 months correlation between Capital and WisdomTree is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group International and WisdomTree Global ex US in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Global 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 International are associated (or correlated) with WisdomTree Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Global has no effect on the direction of Capital Group i.e., Capital Group and WisdomTree Global go up and down completely randomly.

Pair Corralation between Capital Group and WisdomTree Global

Given the investment horizon of 90 days Capital Group International is expected to generate 1.24 times more return on investment than WisdomTree Global. However, Capital Group is 1.24 times more volatile than WisdomTree Global ex US. It trades about 0.01 of its potential returns per unit of risk. WisdomTree Global ex US is currently generating about 0.01 per unit of risk. If you would invest  2,472  in Capital Group International on December 30, 2024 and sell it today you would earn a total of  9.00  from holding Capital Group International or generate 0.36% 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 International  vs.  WisdomTree Global ex US

Capital Group Intern

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Group International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capital Group is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

WisdomTree Global

Risk-Adjusted Performance

Very Weak

Over the last 90 days WisdomTree Global ex US has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, WisdomTree Global is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Capital Group and WisdomTree Global

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

The idea behind Capital Group International and WisdomTree Global ex US 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.