Correlation Between Vanguard Mega and Capital Group

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

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

Diversification Opportunities for Vanguard Mega and Capital Group

0.65

Correlation Coefficient

Vanguard Mega  Capital Group

Poor diversification

The 3 months correlation between Vanguard and Capital is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard Mega Cap and Capital Group Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Growth and Vanguard Mega 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 Vanguard Mega Cap 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 Growth has no effect on the direction of Vanguard Mega i.e., Vanguard Mega and Capital Group go up and down completely randomly.

Pair Corralation between Vanguard Mega and Capital Group

Considering the 90-day investment horizon Vanguard Mega Cap is expected to under-perform the Capital Group. In addition to that, Vanguard Mega is 1.01 times more volatile than Capital Group Growth. It trades about -0.13 of its total potential returns per unit of risk. Capital Group Growth is currently generating about -0.09 per unit of volatility. If you would invest  3,797  in Capital Group Growth on December 21, 2024 and sell it today you would lose (296.00) from holding Capital Group Growth or give up 7.8% of portfolio value over 90 days.

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

Vanguard Mega Cap  vs.  Capital Group Growth

Vanguard Mega Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Mega Cap has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Etf's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

Capital Group Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Group Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest abnormal performance, the Etf's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the ETF retail investors.

Pair Trading with Vanguard Mega and Capital Group

The main advantage of trading using opposite Vanguard Mega and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard Mega 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 Vanguard Mega Cap and Capital Group Growth 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..