Correlation Between Capital Group and Alpha Architect
Can any of the company-specific risk be diversified away by investing in both Capital Group and Alpha Architect 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 Alpha Architect into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Group International and Alpha Architect International, you can compare the effects of market volatilities on Capital Group and Alpha Architect 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 Alpha Architect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Group and Alpha Architect.
Diversification Opportunities for Capital Group and Alpha Architect
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Alpha is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group International and Alpha Architect International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Architect Inte 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 International are associated (or correlated) with Alpha Architect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Architect Inte has no effect on the direction of Capital Group i.e., Capital Group and Alpha Architect go up and down completely randomly.
Pair Corralation between Capital Group and Alpha Architect
Given the investment horizon of 90 days Capital Group International is expected to generate 0.87 times more return on investment than Alpha Architect. However, Capital Group International is 1.16 times less risky than Alpha Architect. It trades about 0.01 of its potential returns per unit of risk. Alpha Architect International is currently generating about -0.01 per unit of risk. If you would invest 2,598 in Capital Group International on September 1, 2024 and sell it today you would earn a total of 12.00 from holding Capital Group International or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Group International vs. Alpha Architect International
Performance |
| Timeline |
| Capital Group Intern |
| Alpha Architect Inte |
Capital Group and Alpha Architect Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Group and Alpha Architect
The main advantage of trading using opposite Capital Group and Alpha Architect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Group position performs unexpectedly, Alpha Architect 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 Alpha Architect will offset losses from the drop in Alpha Architect's long position.| Capital Group vs. Capital Group Dividend | Capital Group vs. Capital Group Global | Capital Group vs. Capital Group Growth | Capital Group vs. Capital Group Core |
| Alpha Architect vs. Alpha Architect Quantitative | Alpha Architect vs. Alpha Architect International | Alpha Architect vs. Alpha Architect Quantitative | Alpha Architect vs. Alpha Architect Value |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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