Correlation Between Capital Income and Federated Global
Can any of the company-specific risk be diversified away by investing in both Capital Income and Federated Global 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 Federated Global 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 Federated Global Allocation, you can compare the effects of market volatilities on Capital Income and Federated Global 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 Federated Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Federated Global.
Diversification Opportunities for Capital Income and Federated Global
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Federated is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Federated Global Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Global All 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 Federated Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Global All has no effect on the direction of Capital Income i.e., Capital Income and Federated Global go up and down completely randomly.
Pair Corralation between Capital Income and Federated Global
Assuming the 90 days horizon Capital Income is expected to generate 2.74 times less return on investment than Federated Global. But when comparing it to its historical volatility, Capital Income Builder is 1.12 times less risky than Federated Global. It trades about 0.14 of its potential returns per unit of risk. Federated Global Allocation is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 2,035 in Federated Global Allocation on September 1, 2024 and sell it today you would earn a total of 68.00 from holding Federated Global Allocation or generate 3.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Capital Income Builder vs. Federated Global Allocation
Performance |
| Timeline |
| Capital Income Builder |
| Federated Global All |
Capital Income and Federated Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Federated Global
The main advantage of trading using opposite Capital Income and Federated Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Federated Global 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 Federated Global will offset losses from the drop in Federated Global's long position.| Capital Income vs. Guggenheim Risk Managed | Capital Income vs. Msif Real Estate | Capital Income vs. Goldman Sachs Real | Capital Income vs. Jhancock Real Estate |
| Federated Global vs. Federated Kaufmann Large | Federated Global vs. Federated Mdt Large | Federated Global vs. Federated Mid Cap Index | Federated Global vs. Federated Max Cap Index |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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