Correlation Between IShares Short and Capital Group

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

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

Diversification Opportunities for IShares Short and Capital Group

0.37

Correlation Coefficient

IShares Short  Capital Group

Weak diversification

The 3 months correlation between IShares and Capital is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding iShares Short Maturity and Capital Group Fixed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Fixed and IShares Short 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 iShares Short Maturity 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 Fixed has no effect on the direction of IShares Short i.e., IShares Short and Capital Group go up and down completely randomly.

Pair Corralation between IShares Short and Capital Group

Given the investment horizon of 90 days iShares Short Maturity is expected to generate 0.45 times more return on investment than Capital Group. However, iShares Short Maturity is 2.23 times less risky than Capital Group. It trades about 0.17 of its potential returns per unit of risk. Capital Group Fixed is currently generating about 0.07 per unit of risk. If you would invest  4,990  in iShares Short Maturity on August 30, 2024 and sell it today you would earn a total of  33.00  from holding iShares Short Maturity or generate 0.66% return on investment over 90 days.

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

iShares Short Maturity  vs.  Capital Group Fixed

iShares Short Maturity

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Short Maturity are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, IShares Short is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Capital Group Fixed

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group Fixed are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Capital Group is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IShares Short and Capital Group

The main advantage of trading using opposite IShares Short and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Short 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 iShares Short Maturity and Capital Group Fixed 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 Commodity Directory module to find actively traded commodities issued by global exchanges.