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 New and First Trust Dorsey, 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
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Capital and First is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group New and First Trust Dorsey in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dorsey 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 New 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 Dorsey 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 New is expected to under-perform the First Trust. But the etf apears to be less risky and, when comparing its historical volatility, Capital Group New is 1.59 times less risky than First Trust. The etf trades about -0.08 of its potential returns per unit of risk. The First Trust Dorsey is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 5,777 in First Trust Dorsey on September 4, 2024 and sell it today you would earn a total of 434.00 from holding First Trust Dorsey or generate 7.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Group New vs. First Trust Dorsey
Performance |
| Timeline |
| Capital Group New |
| First Trust Dorsey |
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. First Trust Dorsey | Capital Group vs. Direxion Daily MSCI | Capital Group vs. MFUT | Capital Group vs. VanEck Morningstar Wide |
| First Trust vs. First Trust Dorsey | First Trust vs. Invesco DWA Momentum | First Trust vs. First Trust Capital | First Trust vs. First Trust Large |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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