Correlation Between Capital Group and Capital World
Can any of the company-specific risk be diversified away by investing in both Capital Group 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 Capital Group and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Group Equity and Capital World Growth, you can compare the effects of market volatilities on Capital Group 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 Capital Group with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Group and Capital World.
Diversification Opportunities for Capital Group and Capital World
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Capital and Capital is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Capital Group Equity 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 Capital Group 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 Group Equity 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 Capital Group i.e., Capital Group and Capital World go up and down completely randomly.
Pair Corralation between Capital Group and Capital World
Assuming the 90 days horizon Capital Group Equity is expected to generate 1.29 times more return on investment than Capital World. However, Capital Group is 1.29 times more volatile than Capital World Growth. It trades about 0.17 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.0 per unit of risk. If you would invest 3,648 in Capital Group Equity on August 28, 2024 and sell it today you would earn a total of 109.00 from holding Capital Group Equity or generate 2.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Group Equity vs. Capital World Growth
Performance |
| Timeline |
| Capital Group Equity |
| Capital World Growth |
Capital Group and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Group and Capital World
The main advantage of trading using opposite Capital Group and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Group 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.| Capital Group vs. Emerging Markets Growth | Capital Group vs. Emerging Markets Growth | Capital Group vs. Emerging Markets Growth | Capital Group vs. Capital Group California |
| Capital World vs. Income Fund Of | Capital World vs. New World Fund | Capital World vs. American Mutual Fund | Capital World vs. American Mutual 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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