Correlation Between Capital Group and Litman Gregory

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

Diversification Opportunities for Capital Group and Litman Gregory

0.92

Correlation Coefficient

Capital Group  Litman Gregory

Almost no diversification

The 3 months correlation between Capital and Litman is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group International and Litman Gregory Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litman Gregory Funds 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 Litman Gregory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litman Gregory Funds has no effect on the direction of Capital Group i.e., Capital Group and Litman Gregory go up and down completely randomly.

Pair Corralation between Capital Group and Litman Gregory

Given the investment horizon of 90 days Capital Group International is expected to generate 1.08 times more return on investment than Litman Gregory. However, Capital Group is 1.08 times more volatile than Litman Gregory Funds. It trades about 0.04 of its potential returns per unit of risk. Litman Gregory Funds is currently generating about 0.03 per unit of risk. If you would invest  2,472  in Capital Group International on December 29, 2024 and sell it today you would earn a total of  65.00  from holding Capital Group International or generate 2.63% 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.  Litman Gregory Funds

Capital Group Intern

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group International 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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Litman Gregory Funds

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Litman Gregory Funds are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable forward indicators, Litman Gregory is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Capital Group and Litman Gregory

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

The idea behind Capital Group International and Litman Gregory Funds 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.