Correlation Between Capital Income and GT Capital
Can any of the company-specific risk be diversified away by investing in both Capital Income and GT Capital 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 GT Capital 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 GT Capital Holdings, you can compare the effects of market volatilities on Capital Income and GT Capital 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 GT Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and GT Capital.
Diversification Opportunities for Capital Income and GT Capital
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and GTCAP is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and GT Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Capital Holdings 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 GT Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Capital Holdings has no effect on the direction of Capital Income i.e., Capital Income and GT Capital go up and down completely randomly.
Pair Corralation between Capital Income and GT Capital
Assuming the 90 days horizon Capital Income Builder is expected to generate 0.33 times more return on investment than GT Capital. However, Capital Income Builder is 2.99 times less risky than GT Capital. It trades about -0.05 of its potential returns per unit of risk. GT Capital Holdings is currently generating about -0.14 per unit of risk. If you would invest 7,264 in Capital Income Builder on October 24, 2024 and sell it today you would lose (187.00) from holding Capital Income Builder or give up 2.57% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Capital Income Builder vs. GT Capital Holdings
Performance |
Timeline |
Capital Income Builder |
GT Capital Holdings |
Capital Income and GT Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Capital Income and GT Capital
The main advantage of trading using opposite Capital Income and GT Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, GT Capital 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 GT Capital will offset losses from the drop in GT Capital's long position.Capital Income vs. Old Westbury Municipal | Capital Income vs. Lord Abbett Intermediate | Capital Income vs. Blackrock Pa Muni | Capital Income vs. Inverse Government Long |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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