Correlation Between Capital Group and First Trust
Can any of the company-specific risk be diversified away by investing in both Capital Group and First Trust 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 Capital Group and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Group Global and First Trust High, you can compare the effects of market volatilities on Capital Group and First Trust 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 Capital Group with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Group and First Trust.
Diversification Opportunities for Capital Group and First Trust
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Capital and First is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Global and First Trust High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust High and Capital Group 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 Capital Group Global are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust High has no effect on the direction of Capital Group i.e., Capital Group and First Trust go up and down completely randomly.
Pair Corralation between Capital Group and First Trust
Given the investment horizon of 90 days Capital Group Global is expected to generate 2.8 times more return on investment than First Trust. However, Capital Group is 2.8 times more volatile than First Trust High. It trades about 0.08 of its potential returns per unit of risk. First Trust High is currently generating about 0.05 per unit of risk. If you would invest 2,278 in Capital Group Global on August 26, 2024 and sell it today you would earn a total of 694.00 from holding Capital Group Global or generate 30.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Group Global vs. First Trust High
Performance |
| Timeline |
| Capital Group Global |
| First Trust High |
Capital Group and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Group and First Trust
The main advantage of trading using opposite Capital Group and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Group position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Capital Group vs. Capital Group Growth | Capital Group vs. Capital Group Dividend | Capital Group vs. Capital Group International | Capital Group vs. Capital Group Core |
| First Trust vs. Capital Group Short | First Trust vs. Capital Group Municipal | First Trust vs. Capital Group Global | First Trust vs. Capital Group Dividend |
Check out your portfolio center.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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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