Correlation Between Vanguard FTSE and Capital Group

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

Diversification Opportunities for Vanguard FTSE and Capital Group

0.84

Correlation Coefficient

Vanguard FTSE  Capital Group

Very poor diversification

The 3 months correlation between Vanguard and Capital is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard FTSE Developed and Capital Group Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Global and Vanguard FTSE 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 FTSE Developed 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 Global has no effect on the direction of Vanguard FTSE i.e., Vanguard FTSE and Capital Group go up and down completely randomly.

Pair Corralation between Vanguard FTSE and Capital Group

Considering the 90-day investment horizon Vanguard FTSE Developed is expected to under-perform the Capital Group. But the etf apears to be less risky and, when comparing its historical volatility, Vanguard FTSE Developed is 1.09 times less risky than Capital Group. The etf trades about -0.28 of its potential returns per unit of risk. The Capital Group Global is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  2,644  in Capital Group Global on October 8, 2024 and sell it today you would lose (76.00) from holding Capital Group Global or give up 2.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

Vanguard FTSE Developed  vs.  Capital Group Global

Vanguard FTSE Developed

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard FTSE Developed has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Vanguard FTSE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Capital Group Global

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Vanguard FTSE and Capital Group

The main advantage of trading using opposite Vanguard FTSE and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vanguard FTSE 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 FTSE Developed and Capital Group Global 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.