Correlation Between Capital Income and Growth Fund
Can any of the company-specific risk be diversified away by investing in both Capital Income and Growth Fund 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 Growth Fund 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 Growth Fund Of, you can compare the effects of market volatilities on Capital Income and Growth Fund 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 Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Growth Fund.
Diversification Opportunities for Capital Income and Growth Fund
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Capital and Growth is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Growth Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund 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 Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund has no effect on the direction of Capital Income i.e., Capital Income and Growth Fund go up and down completely randomly.
Pair Corralation between Capital Income and Growth Fund
Assuming the 90 days horizon Capital Income is expected to generate 7.83 times less return on investment than Growth Fund. But when comparing it to its historical volatility, Capital Income Builder is 2.09 times less risky than Growth Fund. It trades about 0.1 of its potential returns per unit of risk. Growth Fund Of is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 7,661 in Growth Fund Of on September 1, 2024 and sell it today you would earn a total of 515.00 from holding Growth Fund Of or generate 6.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Income Builder vs. Growth Fund Of
Performance |
| Timeline |
| Capital Income Builder |
| Growth Fund |
Capital Income and Growth Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Growth Fund
The main advantage of trading using opposite Capital Income and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Growth Fund 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 Growth Fund will offset losses from the drop in Growth Fund'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 |
| Growth Fund vs. Europacific Growth Fund | Growth Fund vs. Capital World Growth | Growth Fund vs. American Funds Fundamental | Growth Fund vs. Washington Mutual Investors |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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