Correlation Between Capital Management and Capital Appreciation
Can any of the company-specific risk be diversified away by investing in both Capital Management and Capital Appreciation 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 Management and Capital Appreciation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Management Mid Cap and Capital Appreciation Fund, you can compare the effects of market volatilities on Capital Management and Capital Appreciation 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 Management with a short position of Capital Appreciation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Management and Capital Appreciation.
Diversification Opportunities for Capital Management and Capital Appreciation
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Capital and Capital is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Capital Management Mid Cap and Capital Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Appreciation and Capital Management 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 Management Mid Cap are associated (or correlated) with Capital Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Appreciation has no effect on the direction of Capital Management i.e., Capital Management and Capital Appreciation go up and down completely randomly.
Pair Corralation between Capital Management and Capital Appreciation
Assuming the 90 days horizon Capital Management Mid Cap is expected to under-perform the Capital Appreciation. But the mutual fund apears to be less risky and, when comparing its historical volatility, Capital Management Mid Cap is 1.29 times less risky than Capital Appreciation. The mutual fund trades about -0.03 of its potential returns per unit of risk. The Capital Appreciation Fund is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,559 in Capital Appreciation Fund on November 27, 2024 and sell it today you would lose (6.00) from holding Capital Appreciation Fund or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Management Mid Cap vs. Capital Appreciation Fund
Performance |
| Timeline |
| Capital Management Mid |
| Capital Appreciation |
Capital Management and Capital Appreciation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Management and Capital Appreciation
The main advantage of trading using opposite Capital Management and Capital Appreciation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Management position performs unexpectedly, Capital Appreciation 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 Capital Appreciation will offset losses from the drop in Capital Appreciation's long position.| Capital Management vs. T Rowe Price | Capital Management vs. T Rowe Price | Capital Management vs. Jpmorgan Trust I | Capital Management vs. Pace Select Advisors |
| Capital Appreciation vs. Dreyfusstandish Global Fixed | Capital Appreciation vs. Rbc Global Equity | Capital Appreciation vs. Barings Global Floating | Capital Appreciation vs. T Rowe Price |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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