Correlation Between Capital Income and First Trust
Can any of the company-specific risk be diversified away by investing in both Capital Income 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 Income 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 Income Builder and First Trust California, you can compare the effects of market volatilities on Capital Income 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 Income with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and First Trust.
Diversification Opportunities for Capital Income and First Trust
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and First is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and First Trust California in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust California 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 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 California has no effect on the direction of Capital Income i.e., Capital Income and First Trust go up and down completely randomly.
Pair Corralation between Capital Income and First Trust
Assuming the 90 days horizon Capital Income Builder is expected to generate 2.0 times more return on investment than First Trust. However, Capital Income is 2.0 times more volatile than First Trust California. It trades about 0.26 of its potential returns per unit of risk. First Trust California is currently generating about 0.02 per unit of risk. If you would invest 6,893 in Capital Income Builder on November 3, 2024 and sell it today you would earn a total of 206.00 from holding Capital Income Builder or generate 2.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Income Builder vs. First Trust California
Performance |
| Timeline |
| Capital Income Builder |
| First Trust California |
Capital Income and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and First Trust
The main advantage of trading using opposite Capital Income and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income 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.| Capital Income vs. Blackrock Financial Institutions | Capital Income vs. Fidelity Advisor Financial | Capital Income vs. Blackstone Secured Lending | Capital Income vs. 1919 Financial Services |
| First Trust vs. First Trust Municipal | First Trust vs. First Trust Emerging | First Trust vs. First Trust Income | First Trust vs. First Trust Managed |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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