Correlation Between Snap and Capital Group
Can any of the company-specific risk be diversified away by investing in both Snap 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 Snap and Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and Capital Group Short, you can compare the effects of market volatilities on Snap 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 Snap with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and Capital Group.
Diversification Opportunities for Snap and Capital Group
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Snap and Capital is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc 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 Snap 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 Snap Inc 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 Snap i.e., Snap and Capital Group go up and down completely randomly.
Pair Corralation between Snap and Capital Group
Given the investment horizon of 90 days Snap Inc is expected to generate 32.21 times more return on investment than Capital Group. However, Snap is 32.21 times more volatile than Capital Group Short. It trades about 0.01 of its potential returns per unit of risk. Capital Group Short is currently generating about 0.18 per unit of risk. If you would invest 1,284 in Snap Inc on August 24, 2024 and sell it today you would lose (181.00) from holding Snap Inc or give up 14.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Snap Inc vs. Capital Group Short
Performance |
| Timeline |
| Snap Inc |
| Capital Group Short |
Snap and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and Capital Group
The main advantage of trading using opposite Snap and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap 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 Snap Inc and Capital Group Short 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.| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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