Correlation Between Capital Group and Vanguard International

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

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

Diversification Opportunities for Capital Group and Vanguard International

0.86

Correlation Coefficient

Capital Group  Vanguard International

Very poor diversification

The 3 months correlation between Capital and Vanguard is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group International and Vanguard International Dividen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard International and Capital Group 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 Capital Group International are associated (or correlated) with Vanguard International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard International has no effect on the direction of Capital Group i.e., Capital Group and Vanguard International go up and down completely randomly.

Pair Corralation between Capital Group and Vanguard International

Given the investment horizon of 90 days Capital Group International is expected to generate 1.36 times more return on investment than Vanguard International. However, Capital Group is 1.36 times more volatile than Vanguard International Dividend. It trades about -0.06 of its potential returns per unit of risk. Vanguard International Dividend is currently generating about -0.11 per unit of risk. If you would invest  2,687  in Capital Group International on August 30, 2024 and sell it today you would lose (109.00) from holding Capital Group International or give up 4.06% of portfolio value over 90 days.

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

Capital Group International  vs.  Vanguard International Dividen

Capital Group Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Group International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Capital Group is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Vanguard International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard International Dividend has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Vanguard International is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Capital Group and Vanguard International

The main advantage of trading using opposite Capital Group and Vanguard International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Group position performs unexpectedly, Vanguard International 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 Vanguard International will offset losses from the drop in Vanguard International's long position.

The idea behind Capital Group International and Vanguard International Dividend 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.