Correlation Between Capital Income and Balanced Fund
Can any of the company-specific risk be diversified away by investing in both Capital Income and Balanced 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 Balanced 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 Balanced Fund Investor, you can compare the effects of market volatilities on Capital Income and Balanced 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 Balanced Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Balanced Fund.
Diversification Opportunities for Capital Income and Balanced Fund
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CAPITAL and Balanced is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Balanced Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Fund Investor 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 Balanced Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Fund Investor has no effect on the direction of Capital Income i.e., Capital Income and Balanced Fund go up and down completely randomly.
Pair Corralation between Capital Income and Balanced Fund
Assuming the 90 days horizon Capital Income is expected to generate 1.42 times less return on investment than Balanced Fund. But when comparing it to its historical volatility, Capital Income Builder is 1.08 times less risky than Balanced Fund. It trades about 0.07 of its potential returns per unit of risk. Balanced Fund Investor is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,582 in Balanced Fund Investor on September 3, 2024 and sell it today you would earn a total of 446.00 from holding Balanced Fund Investor or generate 28.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Income Builder vs. Balanced Fund Investor
Performance |
| Timeline |
| Capital Income Builder |
| Balanced Fund Investor |
Capital Income and Balanced Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Balanced Fund
The main advantage of trading using opposite Capital Income and Balanced Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Balanced 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 Balanced Fund will offset losses from the drop in Balanced Fund's long position.| Capital Income vs. Champlain Mid Cap | Capital Income vs. Small Pany Growth | Capital Income vs. Ftfa Franklin Templeton Growth | Capital Income vs. Eip Growth And |
| Balanced Fund vs. Select Fund Investor | Balanced Fund vs. Heritage Fund Investor | Balanced Fund vs. Value Fund Investor | Balanced Fund vs. Growth Fund Investor |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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