Correlation Between Capital Income and Barloworld
Can any of the company-specific risk be diversified away by investing in both Capital Income and Barloworld 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 Barloworld 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 Barloworld Ltd ADR, you can compare the effects of market volatilities on Capital Income and Barloworld 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 Barloworld. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Barloworld.
Diversification Opportunities for Capital Income and Barloworld
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CAPITAL and Barloworld is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Barloworld Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barloworld ADR 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 Barloworld. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barloworld ADR has no effect on the direction of Capital Income i.e., Capital Income and Barloworld go up and down completely randomly.
Pair Corralation between Capital Income and Barloworld
Assuming the 90 days horizon Capital Income is expected to generate 7.48 times less return on investment than Barloworld. But when comparing it to its historical volatility, Capital Income Builder is 15.53 times less risky than Barloworld. It trades about 0.08 of its potential returns per unit of risk. Barloworld Ltd ADR is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 436.00 in Barloworld Ltd ADR on August 29, 2024 and sell it today you would lose (13.00) from holding Barloworld Ltd ADR or give up 2.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 71.57% |
| Values | Daily Returns |
Capital Income Builder vs. Barloworld Ltd ADR
Performance |
| Timeline |
| Capital Income Builder |
| Barloworld ADR |
Capital Income and Barloworld Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Barloworld
The main advantage of trading using opposite Capital Income and Barloworld positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Barloworld 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 Barloworld will offset losses from the drop in Barloworld's long position.| Capital Income vs. Allianzgi Convertible Income | Capital Income vs. Absolute Convertible Arbitrage | Capital Income vs. Lord Abbett Convertible | Capital Income vs. Putnam Convertible Incm Gwth |
| Barloworld vs. Hertz Global Holdings | Barloworld vs. United Rentals | Barloworld vs. Ryder System | Barloworld vs. Herc Holdings |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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