Correlation Between Freedom Day and Capital Group
Can any of the company-specific risk be diversified away by investing in both Freedom Day 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 Freedom Day and Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freedom Day Dividend and Capital Group International, you can compare the effects of market volatilities on Freedom Day 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 Freedom Day with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Day and Capital Group.
Diversification Opportunities for Freedom Day and Capital Group
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Freedom and Capital is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Day Dividend 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 Freedom Day 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 Freedom Day Dividend 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 Freedom Day i.e., Freedom Day and Capital Group go up and down completely randomly.
Pair Corralation between Freedom Day and Capital Group
Given the investment horizon of 90 days Freedom Day Dividend is expected to generate 1.1 times more return on investment than Capital Group. However, Freedom Day is 1.1 times more volatile than Capital Group International. It trades about 0.36 of its potential returns per unit of risk. Capital Group International is currently generating about -0.03 per unit of risk. If you would invest 3,316 in Freedom Day Dividend on September 1, 2024 and sell it today you would earn a total of 216.00 from holding Freedom Day Dividend or generate 6.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Freedom Day Dividend vs. Capital Group International
Performance |
| Timeline |
| Freedom Day Dividend |
| Capital Group Intern |
Freedom Day and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freedom Day and Capital Group
The main advantage of trading using opposite Freedom Day and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Day 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.| Freedom Day vs. iShares Core SP | Freedom Day vs. iShares Core MSCI | Freedom Day vs. iShares Broad USD | Freedom Day vs. iShares Core SP |
| Capital Group vs. Invesco SP International | Capital Group vs. Invesco SP International | Capital Group vs. Invesco FTSE RAFI | Capital Group vs. Invesco SP Emerging |
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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