Correlation Between Capital World and American Funds
Can any of the company-specific risk be diversified away by investing in both Capital World and American Funds 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 World and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital World Bond and American Funds Growth, you can compare the effects of market volatilities on Capital World and American Funds 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 World with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and American Funds.
Diversification Opportunities for Capital World and American Funds
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CAPITAL and American is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Bond and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth and Capital World 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 World Bond are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Growth has no effect on the direction of Capital World i.e., Capital World and American Funds go up and down completely randomly.
Pair Corralation between Capital World and American Funds
Assuming the 90 days horizon Capital World Bond is expected to under-perform the American Funds. But the mutual fund apears to be less risky and, when comparing its historical volatility, Capital World Bond is 2.06 times less risky than American Funds. The mutual fund trades about -0.25 of its potential returns per unit of risk. The American Funds Growth is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,654 in American Funds Growth on August 31, 2024 and sell it today you would earn a total of 73.00 from holding American Funds Growth or generate 2.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Bond vs. American Funds Growth
Performance |
| Timeline |
| Capital World Bond |
| American Funds Growth |
Capital World and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and American Funds
The main advantage of trading using opposite Capital World and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Capital World vs. Prudential Short Duration | Capital World vs. Legg Mason Partners | Capital World vs. Pioneer High Yield | Capital World vs. Multi Manager High Yield |
| American Funds vs. Blackrock High Yield | American Funds vs. Valic Company I | American Funds vs. Pioneer High Yield | American Funds vs. Metropolitan West High |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance |