Correlation Between Capital Income and Hammond Power
Can any of the company-specific risk be diversified away by investing in both Capital Income and Hammond Power 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 Hammond Power 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 Hammond Power Solutions, you can compare the effects of market volatilities on Capital Income and Hammond Power 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 Hammond Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Hammond Power.
Diversification Opportunities for Capital Income and Hammond Power
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Hammond is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Hammond Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammond Power Solutions 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 Hammond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammond Power Solutions has no effect on the direction of Capital Income i.e., Capital Income and Hammond Power go up and down completely randomly.
Pair Corralation between Capital Income and Hammond Power
Assuming the 90 days horizon Capital Income Builder is expected to generate 0.26 times more return on investment than Hammond Power. However, Capital Income Builder is 3.88 times less risky than Hammond Power. It trades about 0.24 of its potential returns per unit of risk. Hammond Power Solutions is currently generating about -0.13 per unit of risk. If you would invest 6,906 in Capital Income Builder on October 24, 2024 and sell it today you would earn a total of 171.00 from holding Capital Income Builder or generate 2.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Capital Income Builder vs. Hammond Power Solutions
Performance |
| Timeline |
| Capital Income Builder |
| Hammond Power Solutions |
Capital Income and Hammond Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Hammond Power
The main advantage of trading using opposite Capital Income and Hammond Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Hammond Power 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 Hammond Power will offset losses from the drop in Hammond Power'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 |
| Hammond Power vs. Hammond Manufacturing | Hammond Power vs. Firan Technology Group | Hammond Power vs. Supremex | Hammond Power vs. Geodrill Limited |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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