Correlation Between Edgepoint Global and Capital Group

Can any of the company-specific risk be diversified away by investing in both Edgepoint Global 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 Edgepoint Global and Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Edgepoint Global Portfolio and Capital Group Global, you can compare the effects of market volatilities on Edgepoint Global 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 Edgepoint Global with a short position of Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edgepoint Global and Capital Group.

Diversification Opportunities for Edgepoint Global and Capital Group

0.95

Correlation Coefficient

Edgepoint Global  Capital Group

Almost no diversification

The 3 months correlation between Edgepoint and Capital is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Edgepoint Global Portfolio and Capital Group Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Global and Edgepoint Global 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 Edgepoint Global Portfolio 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 Global has no effect on the direction of Edgepoint Global i.e., Edgepoint Global and Capital Group go up and down completely randomly.

Pair Corralation between Edgepoint Global and Capital Group

Assuming the 90 days trading horizon Edgepoint Global is expected to generate 1.35 times less return on investment than Capital Group. But when comparing it to its historical volatility, Edgepoint Global Portfolio is 1.08 times less risky than Capital Group. It trades about 0.2 of its potential returns per unit of risk. Capital Group Global is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  5,672  in Capital Group Global on September 12, 2024 and sell it today you would earn a total of  608.00  from holding Capital Group Global or generate 10.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Edgepoint Global Portfolio  vs.  Capital Group Global

Edgepoint Global Por

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Edgepoint Global Portfolio are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. Despite fairly sluggish forward indicators, Edgepoint Global may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Capital Group Global

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Global are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Capital Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Edgepoint Global and Capital Group

The main advantage of trading using opposite Edgepoint Global and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edgepoint Global 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 Edgepoint Global Portfolio and Capital Group Global 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.

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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.