Correlation Between Capital Group and First Trust

Can any of the company-specific risk be diversified away by investing in both Capital Group and First Trust 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 First Trust 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 First Trust International, you can compare the effects of market volatilities on Capital Group and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Group and First Trust.

Diversification Opportunities for Capital Group and First Trust

0.33

Correlation Coefficient

Capital Group  First Trust

Weak diversification

The 3 months correlation between Capital and First is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group International and First Trust International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust International has no effect on the direction of Capital Group i.e., Capital Group and First Trust go up and down completely randomly.

Pair Corralation between Capital Group and First Trust

Given the investment horizon of 90 days Capital Group International is expected to generate 1.06 times more return on investment than First Trust. However, Capital Group is 1.06 times more volatile than First Trust International. It trades about 0.16 of its potential returns per unit of risk. First Trust International is currently generating about 0.0 per unit of risk. If you would invest  2,594  in Capital Group International on May 15, 2025 and sell it today you would earn a total of  203.00  from holding Capital Group International or generate 7.83% return on investment over 90 days.

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

Capital Group International  vs.  First Trust International

Capital Group Intern

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Group International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Capital Group may actually be approaching a critical reversion point that can send shares even higher in September 2025.

First Trust International

Risk-Adjusted Performance

Weakest

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

Pair Trading with Capital Group and First Trust

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

The idea behind Capital Group International and First Trust International 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.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.