Correlation Between Amcap Fund and Capital World
Can any of the company-specific risk be diversified away by investing in both Amcap 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 Amcap 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 Amcap Fund Class and Capital World Growth, you can compare the effects of market volatilities on Amcap 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 Amcap Fund with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amcap Fund and Capital World.
Diversification Opportunities for Amcap Fund and Capital World
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Amcap and Capital is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Amcap Fund Class and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Amcap 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 Amcap Fund Class 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 Growth has no effect on the direction of Amcap Fund i.e., Amcap Fund and Capital World go up and down completely randomly.
Pair Corralation between Amcap Fund and Capital World
Assuming the 90 days horizon Amcap Fund Class is expected to generate 1.43 times more return on investment than Capital World. However, Amcap Fund is 1.43 times more volatile than Capital World Growth. It trades about 0.11 of its potential returns per unit of risk. Capital World Growth is currently generating about -0.02 per unit of risk. If you would invest 4,396 in Amcap Fund Class on August 26, 2024 and sell it today you would earn a total of 92.00 from holding Amcap Fund Class or generate 2.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amcap Fund Class vs. Capital World Growth
Performance |
| Timeline |
| Amcap Fund Class |
| Capital World Growth |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Amcap Fund and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amcap Fund and Capital World
The main advantage of trading using opposite Amcap Fund and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amcap 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.| Amcap Fund vs. Europacific Growth Fund | Amcap Fund vs. Capital World Growth | Amcap Fund vs. Washington Mutual Investors | Amcap Fund vs. American Mutual Fund |
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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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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