Correlation Between Six Circles and Capital World
Can any of the company-specific risk be diversified away by investing in both Six Circles and Capital World 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 Six Circles and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Six Circles Global and Capital World Bond, you can compare the effects of market volatilities on Six Circles and Capital World 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 Six Circles with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Six Circles and Capital World.
Diversification Opportunities for Six Circles and Capital World
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Six and Capital is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Six Circles Global and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond and Six Circles 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 Six Circles Global are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of Six Circles i.e., Six Circles and Capital World go up and down completely randomly.
Pair Corralation between Six Circles and Capital World
Assuming the 90 days horizon Six Circles Global is expected to generate 0.44 times more return on investment than Capital World. However, Six Circles Global is 2.28 times less risky than Capital World. It trades about 0.36 of its potential returns per unit of risk. Capital World Bond is currently generating about 0.06 per unit of risk. If you would invest 849.00 in Six Circles Global on September 2, 2024 and sell it today you would earn a total of 12.00 from holding Six Circles Global or generate 1.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Six Circles Global vs. Capital World Bond
Performance |
| Timeline |
| Six Circles Global |
| Capital World Bond |
Six Circles and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Six Circles and Capital World
The main advantage of trading using opposite Six Circles and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Six Circles position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.| Six Circles vs. Six Circles Ultra | Six Circles vs. Six Circles Tax | Six Circles vs. Six Circles Unconstrained | Six Circles vs. Six Circles International |
| Capital World vs. Small Cap Equity | Capital World vs. Locorr Dynamic Equity | Capital World vs. Balanced Fund Retail | Capital World vs. The Gabelli Equity |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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