Correlation Between Capital Income and Alstom SA
Can any of the company-specific risk be diversified away by investing in both Capital Income and Alstom SA 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 Income and Alstom SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Income Builder and Alstom SA, you can compare the effects of market volatilities on Capital Income and Alstom SA 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 Income with a short position of Alstom SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Alstom SA.
Diversification Opportunities for Capital Income and Alstom SA
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Capital and Alstom is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Alstom SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alstom SA and Capital Income 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 Income Builder are associated (or correlated) with Alstom SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alstom SA has no effect on the direction of Capital Income i.e., Capital Income and Alstom SA go up and down completely randomly.
Pair Corralation between Capital Income and Alstom SA
Assuming the 90 days horizon Capital Income is expected to generate 5.51 times less return on investment than Alstom SA. But when comparing it to its historical volatility, Capital Income Builder is 6.2 times less risky than Alstom SA. It trades about 0.08 of its potential returns per unit of risk. Alstom SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,229 in Alstom SA on November 3, 2024 and sell it today you would earn a total of 749.00 from holding Alstom SA or generate 60.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Income Builder vs. Alstom SA
Performance |
| Timeline |
| Capital Income Builder |
| Alstom SA |
Capital Income and Alstom SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Alstom SA
The main advantage of trading using opposite Capital Income and Alstom SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Alstom SA 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 Alstom SA will offset losses from the drop in Alstom SA's long position.| Capital Income vs. Blackrock Financial Institutions | Capital Income vs. Fidelity Advisor Financial | Capital Income vs. Blackstone Secured Lending | Capital Income vs. 1919 Financial Services |
| Alstom SA vs. Westinghouse Air Brake | Alstom SA vs. Canadian Pacific Railway | Alstom SA vs. Trinity Industries | Alstom SA vs. CSX Corporation |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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