Correlation Between Capital Income and Europacific Growth
Can any of the company-specific risk be diversified away by investing in both Capital Income and Europacific Growth 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 Europacific Growth 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 Europacific Growth Fund, you can compare the effects of market volatilities on Capital Income and Europacific Growth 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 Europacific Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Europacific Growth.
Diversification Opportunities for Capital Income and Europacific Growth
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Europacific is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Europacific Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europacific Growth 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 Europacific Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europacific Growth has no effect on the direction of Capital Income i.e., Capital Income and Europacific Growth go up and down completely randomly.
Pair Corralation between Capital Income and Europacific Growth
Assuming the 90 days horizon Capital Income Builder is expected to generate 0.57 times more return on investment than Europacific Growth. However, Capital Income Builder is 1.76 times less risky than Europacific Growth. It trades about 0.1 of its potential returns per unit of risk. Europacific Growth Fund is currently generating about 0.04 per unit of risk. If you would invest 7,242 in Capital Income Builder on September 1, 2024 and sell it today you would earn a total of 60.00 from holding Capital Income Builder or generate 0.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Income Builder vs. Europacific Growth Fund
Performance |
| Timeline |
| Capital Income Builder |
| Europacific Growth |
Capital Income and Europacific Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Europacific Growth
The main advantage of trading using opposite Capital Income and Europacific Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Europacific Growth 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 Europacific Growth will offset losses from the drop in Europacific Growth's long position.| Capital Income vs. Income Fund Of | Capital Income vs. Capital World Growth | Capital Income vs. American Balanced Fund | Capital Income vs. Growth Fund Of |
| Europacific Growth vs. Growth Fund Of | Europacific Growth vs. Washington Mutual Investors | Europacific Growth vs. American Funds Fundamental | Europacific Growth vs. New World 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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