Correlation Between Capital Income and Highway 50
Can any of the company-specific risk be diversified away by investing in both Capital Income and Highway 50 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 Highway 50 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 Highway 50 Gold, you can compare the effects of market volatilities on Capital Income and Highway 50 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 Highway 50. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Highway 50.
Diversification Opportunities for Capital Income and Highway 50
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and Highway is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Highway 50 Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highway 50 Gold 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 Highway 50. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highway 50 Gold has no effect on the direction of Capital Income i.e., Capital Income and Highway 50 go up and down completely randomly.
Pair Corralation between Capital Income and Highway 50
Assuming the 90 days horizon Capital Income Builder is expected to generate 0.22 times more return on investment than Highway 50. However, Capital Income Builder is 4.48 times less risky than Highway 50. It trades about 0.23 of its potential returns per unit of risk. Highway 50 Gold is currently generating about 0.01 per unit of risk. If you would invest 6,906 in Capital Income Builder on October 23, 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 | Weak |
| Accuracy | 94.74% |
| Values | Daily Returns |
Capital Income Builder vs. Highway 50 Gold
Performance |
| Timeline |
| Capital Income Builder |
| Highway 50 Gold |
Capital Income and Highway 50 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Highway 50
The main advantage of trading using opposite Capital Income and Highway 50 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Highway 50 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 Highway 50 will offset losses from the drop in Highway 50's long position.| Capital Income vs. Legg Mason Partners | Capital Income vs. Artisan Developing World | Capital Income vs. Ab All Market | Capital Income vs. Oklahoma College Savings |
| Highway 50 vs. Amex Exploration | Highway 50 vs. Jaxon Mining | Highway 50 vs. Jade Leader Corp | Highway 50 vs. BMO Aggregate Bond |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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