Correlation Between Us Government and Capital World
Can any of the company-specific risk be diversified away by investing in both Us Government 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 Us Government and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Securities and Capital World Bond, you can compare the effects of market volatilities on Us Government 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 Us Government with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and Capital World.
Diversification Opportunities for Us Government and Capital World
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between CGTCX and Capital is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities 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 Us Government 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 Us Government Securities 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 Us Government i.e., Us Government and Capital World go up and down completely randomly.
Pair Corralation between Us Government and Capital World
Assuming the 90 days horizon Us Government Securities is expected to generate 0.82 times more return on investment than Capital World. However, Us Government Securities is 1.21 times less risky than Capital World. It trades about 0.03 of its potential returns per unit of risk. Capital World Bond is currently generating about -0.1 per unit of risk. If you would invest 1,177 in Us Government Securities on August 28, 2024 and sell it today you would earn a total of 2.00 from holding Us Government Securities or generate 0.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. Capital World Bond
Performance |
| Timeline |
| Us Government Securities |
| Capital World Bond |
Us Government and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and Capital World
The main advantage of trading using opposite Us Government and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government 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.| Us Government vs. Bond Fund Of | Us Government vs. Capital World Bond | Us Government vs. American Mutual Fund | Us Government vs. Smallcap World Fund |
| Capital World vs. Income Fund Of | Capital World vs. New World Fund | Capital World vs. American Mutual Fund | Capital World vs. American Mutual Fund |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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