Correlation Between IShares Select and Capital Group

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

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

Diversification Opportunities for IShares Select and Capital Group

0.76

Correlation Coefficient

IShares Select  Capital Group

Poor diversification

The 3 months correlation between IShares and Capital is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding iShares Select Dividend and Capital Group Dividend in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Dividend and IShares Select 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 iShares Select Dividend 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 Dividend has no effect on the direction of IShares Select i.e., IShares Select and Capital Group go up and down completely randomly.

Pair Corralation between IShares Select and Capital Group

Considering the 90-day investment horizon IShares Select is expected to generate 2.62 times less return on investment than Capital Group. In addition to that, IShares Select is 1.16 times more volatile than Capital Group Dividend. It trades about 0.04 of its total potential returns per unit of risk. Capital Group Dividend is currently generating about 0.12 per unit of volatility. If you would invest  2,403  in Capital Group Dividend on October 23, 2024 and sell it today you would earn a total of  1,226  from holding Capital Group Dividend or generate 51.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

iShares Select Dividend  vs.  Capital Group Dividend

iShares Select Dividend

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Select Dividend are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares Select is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Capital Group Dividend

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Group Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Capital Group is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares Select and Capital Group

The main advantage of trading using opposite IShares Select and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Select 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 iShares Select Dividend and Capital Group Dividend 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.