Correlation Between Commonwealth Japan and Capital World
Can any of the company-specific risk be diversified away by investing in both Commonwealth Japan and Capital World 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 Commonwealth Japan and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Japan Fund and Capital World Growth, you can compare the effects of market volatilities on Commonwealth Japan and Capital World 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 Commonwealth Japan with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Japan and Capital World.
Diversification Opportunities for Commonwealth Japan and Capital World
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Commonwealth and Capital is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Japan Fund and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Commonwealth Japan 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 Commonwealth Japan Fund are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Commonwealth Japan i.e., Commonwealth Japan and Capital World go up and down completely randomly.
Pair Corralation between Commonwealth Japan and Capital World
Assuming the 90 days horizon Commonwealth Japan is expected to generate 2.33 times less return on investment than Capital World. In addition to that, Commonwealth Japan is 1.78 times more volatile than Capital World Growth. It trades about 0.03 of its total potential returns per unit of risk. Capital World Growth is currently generating about 0.13 per unit of volatility. If you would invest 5,385 in Capital World Growth on September 1, 2024 and sell it today you would earn a total of 1,498 from holding Capital World Growth or generate 27.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Commonwealth Japan Fund vs. Capital World Growth
Performance |
| Timeline |
| Commonwealth Japan |
| Capital World Growth |
Commonwealth Japan and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Japan and Capital World
The main advantage of trading using opposite Commonwealth Japan and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Japan position performs unexpectedly, Capital World 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 World will offset losses from the drop in Capital World's long position.| Commonwealth Japan vs. Commonwealth Australianew Zealand | Commonwealth Japan vs. Lazard Emerging Markets | Commonwealth Japan vs. ATLANTIC PETROLPF DK | Commonwealth Japan vs. Ashmore Emerging Markets |
| Capital World vs. Dreyfus Technology Growth | Capital World vs. Pgim Jennison Technology | Capital World vs. Global Technology Portfolio | Capital World vs. Science Technology Fund |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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