Correlation Between ETF Series and Capital Group
Can any of the company-specific risk be diversified away by investing in both ETF Series 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 ETF Series and Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETF Series Solutions and Capital Group Short, you can compare the effects of market volatilities on ETF Series 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 ETF Series with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETF Series and Capital Group.
Diversification Opportunities for ETF Series and Capital Group
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between ETF and Capital is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ETF Series Solutions 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 ETF Series 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 ETF Series Solutions 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 ETF Series i.e., ETF Series and Capital Group go up and down completely randomly.
Pair Corralation between ETF Series and Capital Group
Given the investment horizon of 90 days ETF Series Solutions is expected to generate 1.06 times more return on investment than Capital Group. However, ETF Series is 1.06 times more volatile than Capital Group Short. It trades about 0.33 of its potential returns per unit of risk. Capital Group Short is currently generating about 0.11 per unit of risk. If you would invest 2,489 in ETF Series Solutions on August 28, 2024 and sell it today you would earn a total of 56.00 from holding ETF Series Solutions or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETF Series Solutions vs. Capital Group Short
Performance |
| Timeline |
| ETF Series Solutions |
| Capital Group Short |
ETF Series and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETF Series and Capital Group
The main advantage of trading using opposite ETF Series and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETF Series 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.| ETF Series vs. Capital Group Short | ETF Series vs. Capital Group Municipal | ETF Series vs. Capital Group Global | ETF Series vs. Capital Group Dividend |
| Capital Group vs. Dimensional ETF Trust | Capital Group vs. Dimensional ETF Trust | Capital Group vs. Dimensional Core Equity | Capital Group vs. Dimensional ETF Trust |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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