Correlation Between Capital Income and China Water
Can any of the company-specific risk be diversified away by investing in both Capital Income and China Water 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 China Water 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 China Water Affairs, you can compare the effects of market volatilities on Capital Income and China Water 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 China Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and China Water.
Diversification Opportunities for Capital Income and China Water
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Capital and China is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and China Water Affairs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Water Affairs 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 China Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Water Affairs has no effect on the direction of Capital Income i.e., Capital Income and China Water go up and down completely randomly.
Pair Corralation between Capital Income and China Water
Assuming the 90 days horizon Capital Income is expected to generate 5.19 times less return on investment than China Water. But when comparing it to its historical volatility, Capital Income Builder is 10.04 times less risky than China Water. It trades about 0.26 of its potential returns per unit of risk. China Water Affairs is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 47.00 in China Water Affairs on November 3, 2024 and sell it today you would earn a total of 7.00 from holding China Water Affairs or generate 14.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.3% |
| Values | Daily Returns |
Capital Income Builder vs. China Water Affairs
Performance |
| Timeline |
| Capital Income Builder |
| China Water Affairs |
Capital Income and China Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and China Water
The main advantage of trading using opposite Capital Income and China Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, China Water 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 China Water will offset losses from the drop in China Water's long position.| Capital Income vs. Dws Global Macro | Capital Income vs. Rbb Fund | Capital Income vs. Kinetics Global Fund | Capital Income vs. Ms Global Fixed |
| China Water vs. CarsalesCom | China Water vs. FLOW TRADERS LTD | China Water vs. SCIENCE IN SPORT | China Water vs. TITANIUM TRANSPORTGROUP |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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