Correlation Between IShares SP and Capital Group

Can any of the company-specific risk be diversified away by investing in both IShares SP 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 SP 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 SP 500 and Capital Group Conservative, you can compare the effects of market volatilities on IShares SP 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 SP with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Capital Group.

Diversification Opportunities for IShares SP and Capital Group

0.8

Correlation Coefficient

IShares SP  Capital Group

Very poor diversification

The 3 months correlation between IShares and Capital is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Capital Group Conservative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Conser and IShares SP 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 SP 500 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 Conser has no effect on the direction of IShares SP i.e., IShares SP and Capital Group go up and down completely randomly.

Pair Corralation between IShares SP and Capital Group

Considering the 90-day investment horizon iShares SP 500 is expected to under-perform the Capital Group. In addition to that, IShares SP is 1.06 times more volatile than Capital Group Conservative. It trades about -0.01 of its total potential returns per unit of risk. Capital Group Conservative is currently generating about 0.05 per unit of volatility. If you would invest  2,670  in Capital Group Conservative on December 21, 2024 and sell it today you would earn a total of  49.00  from holding Capital Group Conservative or generate 1.84% return on investment over 90 days.

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

iShares SP 500  vs.  Capital Group Conservative

iShares SP 500

Risk-Adjusted Performance

Very Weak

Over the last 90 days iShares SP 500 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, IShares SP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Capital Group Conser

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Conservative are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, Capital Group is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with IShares SP and Capital Group

The main advantage of trading using opposite IShares SP and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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 SP 500 and Capital Group Conservative 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..