Correlation Between ALPSSmith Credit and Capital Group

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

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

Diversification Opportunities for ALPSSmith Credit and Capital Group

0.98

Correlation Coefficient

ALPSSmith Credit  Capital Group

Almost no diversification

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

Pair Corralation between ALPSSmith Credit and Capital Group

Assuming the 90 days horizon ALPSSmith Credit Opportunities is expected to generate about the same return on investment as Capital Group Multi Sector. But, ALPSSmith Credit Opportunities is 1.17 times less risky than Capital Group. It trades about 0.06 of its potential returns per unit of risk. Capital Group Multi Sector is currently generating about 0.05 per unit of risk. If you would invest  2,709  in Capital Group Multi Sector on December 30, 2024 and sell it today you would earn a total of  21.00  from holding Capital Group Multi Sector or generate 0.78% return on investment over 90 days.

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

ALPSSmith Credit Opportunities  vs.  Capital Group Multi Sector

ALPSSmith Credit Opp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ALPSSmith Credit Opportunities are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, ALPSSmith Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Capital Group Multi

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Multi Sector are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Capital Group is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ALPSSmith Credit and Capital Group

The main advantage of trading using opposite ALPSSmith Credit and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ALPSSmith Credit 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 ALPSSmith Credit Opportunities and Capital Group Multi Sector 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.