Correlation Between Income Fund and Capital World
Can any of the company-specific risk be diversified away by investing in both Income Fund and Capital World 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 Income Fund and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Fund Of and Capital World Bond, you can compare the effects of market volatilities on Income Fund and Capital World 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 Income Fund with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and Capital World.
Diversification Opportunities for Income Fund and Capital World
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Income and CAPITAL is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Of and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond and Income Fund 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 Income Fund Of are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Income Fund i.e., Income Fund and Capital World go up and down completely randomly.
Pair Corralation between Income Fund and Capital World
Assuming the 90 days horizon Income Fund Of is expected to generate 0.97 times more return on investment than Capital World. However, Income Fund Of is 1.04 times less risky than Capital World. It trades about 0.25 of its potential returns per unit of risk. Capital World Bond is currently generating about 0.02 per unit of risk. If you would invest 2,571 in Income Fund Of on September 1, 2024 and sell it today you would earn a total of 57.00 from holding Income Fund Of or generate 2.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Income Fund Of vs. Capital World Bond
Performance |
| Timeline |
| Income Fund |
| Capital World Bond |
Income Fund and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Fund and Capital World
The main advantage of trading using opposite Income Fund and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund position performs unexpectedly, Capital World 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 World will offset losses from the drop in Capital World's long position.| Income Fund vs. Capital Income Builder | Income Fund vs. Capital World Growth | Income Fund vs. American Balanced | Income Fund vs. American Funds Fundamental |
| Capital World vs. Income Fund Of | Capital World vs. New World Fund | Capital World vs. American Mutual Fund | Capital World vs. American Mutual Fund |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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