Correlation Between IShares Core and Capital Group

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

Diversification Opportunities for IShares Core and Capital Group

0.98

Correlation Coefficient

IShares Core  Capital Group

Almost no diversification

The 3 months correlation between IShares and Capital is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core SP and Capital Group Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Core and IShares Core 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 Core SP 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 Core has no effect on the direction of IShares Core i.e., IShares Core and Capital Group go up and down completely randomly.

Pair Corralation between IShares Core and Capital Group

Considering the 90-day investment horizon IShares Core is expected to generate 1.01 times less return on investment than Capital Group. In addition to that, IShares Core is 1.04 times more volatile than Capital Group Core. It trades about 0.12 of its total potential returns per unit of risk. Capital Group Core is currently generating about 0.13 per unit of volatility. If you would invest  2,191  in Capital Group Core on September 22, 2024 and sell it today you would earn a total of  1,336  from holding Capital Group Core or generate 60.98% return on investment over 90 days.

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

iShares Core SP  vs.  Capital Group Core

iShares Core SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Core is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Capital Group Core

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Core are ranked lower than 5 (%) 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 recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with IShares Core and Capital Group

The main advantage of trading using opposite IShares Core and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 Core SP and Capital Group Core 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.