Correlation Between IShares Core and Capital Group

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Can any of the company-specific risk be diversified away by investing in both IShares Core 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 IShares Core and Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Core MSCI and Capital Group International, you can compare the effects of market volatilities on IShares Core 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 IShares Core with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Core and Capital Group.

Diversification Opportunities for IShares Core and Capital Group

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between IShares and Capital is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding iShares Core MSCI and Capital Group International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Intern and IShares Core 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 iShares Core MSCI 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 Intern has no effect on the direction of IShares Core i.e., IShares Core and Capital Group go up and down completely randomly.

Pair Corralation between IShares Core and Capital Group

Given the investment horizon of 90 days IShares Core is expected to generate 215.24 times less return on investment than Capital Group. But when comparing it to its historical volatility, iShares Core MSCI is 97.72 times less risky than Capital Group. It trades about 0.04 of its potential returns per unit of risk. Capital Group International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Capital Group International on September 12, 2024 and sell it today you would earn a total of  2,491  from holding Capital Group International or generate 9.223372036854776E16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy31.64%
ValuesDaily Returns

iShares Core MSCI  vs.  Capital Group International

 Performance 
       Timeline  
iShares Core MSCI 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, IShares Core is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Capital Group Intern 

Risk-Adjusted Performance

0 of 100

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

IShares Core and Capital Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with IShares Core and Capital Group

The main advantage of trading using opposite IShares Core and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Core 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 iShares Core MSCI and Capital Group International 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.
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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