Correlation Between First Trust and Capital Group
Can any of the company-specific risk be diversified away by investing in both First Trust 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 First Trust and Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Trust High and Capital Group Short, you can compare the effects of market volatilities on First Trust 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 First Trust with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Trust and Capital Group.
Diversification Opportunities for First Trust and Capital Group
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Capital is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding First Trust High and Capital Group Short in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Short and First Trust 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 First Trust High 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 Short has no effect on the direction of First Trust i.e., First Trust and Capital Group go up and down completely randomly.
Pair Corralation between First Trust and Capital Group
Given the investment horizon of 90 days First Trust is expected to generate 1.22 times less return on investment than Capital Group. In addition to that, First Trust is 1.96 times more volatile than Capital Group Short. It trades about 0.05 of its total potential returns per unit of risk. Capital Group Short is currently generating about 0.13 per unit of volatility. If you would invest 2,323 in Capital Group Short on August 26, 2024 and sell it today you would earn a total of 244.00 from holding Capital Group Short or generate 10.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Trust High vs. Capital Group Short
Performance |
| Timeline |
| First Trust High |
| Capital Group Short |
First Trust and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Trust and Capital Group
The main advantage of trading using opposite First Trust and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Trust 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.| First Trust vs. Capital Group Short | First Trust vs. Capital Group Municipal | First Trust vs. Capital Group Global | First Trust vs. Capital Group Dividend |
| Capital Group vs. Capital Group Multi Sector | Capital Group vs. Capital Group Municipal | Capital Group vs. Capital Group Global | Capital Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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