Correlation Between Capital Income and CGI
Can any of the company-specific risk be diversified away by investing in both Capital Income and CGI 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 CGI 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 CGI Inc, you can compare the effects of market volatilities on Capital Income and CGI 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 CGI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and CGI.
Diversification Opportunities for Capital Income and CGI
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Capital and CGI is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and CGI Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CGI Inc 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 CGI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CGI Inc has no effect on the direction of Capital Income i.e., Capital Income and CGI go up and down completely randomly.
Pair Corralation between Capital Income and CGI
Assuming the 90 days horizon Capital Income is expected to generate 2.5 times less return on investment than CGI. But when comparing it to its historical volatility, Capital Income Builder is 1.86 times less risky than CGI. It trades about 0.04 of its potential returns per unit of risk. CGI Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14,783 in CGI Inc on October 22, 2024 and sell it today you would earn a total of 903.00 from holding CGI Inc or generate 6.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
Capital Income Builder vs. CGI Inc
Performance |
| Timeline |
| Capital Income Builder |
| CGI Inc |
Capital Income and CGI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and CGI
The main advantage of trading using opposite Capital Income and CGI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, CGI 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 CGI will offset losses from the drop in CGI's long position.| Capital Income vs. Alternative Asset Allocation | Capital Income vs. Tax Managed Mid Small | Capital Income vs. Victory Incore Fund | Capital Income vs. Lord Abbett Diversified |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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