Correlation Between Dimensional International and Capital Group

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

By analyzing existing cross correlation between Dimensional International High and Capital Group International, you can compare the effects of market volatilities on Dimensional International and Capital Group 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 Dimensional International with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimensional International and Capital Group.

Diversification Opportunities for Dimensional International and Capital Group

0.93

Correlation Coefficient

Dimensional International  Capital Group

Almost no diversification

The 3 months correlation between Dimensional and Capital is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Dimensional International High and Capital Group International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Intern and Dimensional International 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 Dimensional International High are associated (or correlated) with Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Intern has no effect on the direction of Dimensional International i.e., Dimensional International and Capital Group go up and down completely randomly.

Pair Corralation between Dimensional International and Capital Group

Given the investment horizon of 90 days Dimensional International High is expected to generate 1.36 times more return on investment than Capital Group. However, Dimensional International is 1.36 times more volatile than Capital Group International. It trades about 0.19 of its potential returns per unit of risk. Capital Group International is currently generating about 0.19 per unit of risk. If you would invest  2,562  in Dimensional International High on September 14, 2024 and sell it today you would earn a total of  60.00  from holding Dimensional International High or generate 2.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Dimensional International High  vs.  Capital Group International

Dimensional International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional International High has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Dimensional International is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Capital Group Intern

Risk-Adjusted Performance

0 of 100

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 rather sound forward indicators, Capital Group is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dimensional International and Capital Group

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

The idea behind Dimensional International High and Capital Group International 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.