Correlation Between IShares SP and Capital Group
Can any of the company-specific risk be diversified away by investing in both IShares SP 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 SP 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 SP 500 and Capital Group Growth, you can compare the effects of market volatilities on IShares SP 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 SP with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and Capital Group.
Diversification Opportunities for IShares SP and Capital Group
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Capital is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and Capital Group Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Growth and IShares SP 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 SP 500 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 Growth has no effect on the direction of IShares SP i.e., IShares SP and Capital Group go up and down completely randomly.
Pair Corralation between IShares SP and Capital Group
Considering the 90-day investment horizon IShares SP is expected to generate 1.12 times less return on investment than Capital Group. But when comparing it to its historical volatility, iShares SP 500 is 1.04 times less risky than Capital Group. It trades about 0.12 of its potential returns per unit of risk. Capital Group Growth is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,031 in Capital Group Growth on August 28, 2024 and sell it today you would earn a total of 1,713 from holding Capital Group Growth or generate 84.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares SP 500 vs. Capital Group Growth
Performance |
| Timeline |
| iShares SP 500 |
| Capital Group Growth |
IShares SP and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares SP and Capital Group
The main advantage of trading using opposite IShares SP and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP 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.| IShares SP vs. Invesco Dynamic Large | IShares SP vs. Perella Weinberg Partners | IShares SP vs. HUMANA INC | IShares SP vs. Aquagold International |
| Capital Group vs. Capital Group Dividend | Capital Group vs. Capital Group Core | Capital Group vs. Capital Group Global | Capital Group vs. Capital Group International |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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