Correlation Between Capital World and Investment
Can any of the company-specific risk be diversified away by investing in both Capital World and Investment 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 Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital World Growth and Investment Of America, you can compare the effects of market volatilities on Capital World and Investment 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 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Investment.
Diversification Opportunities for Capital World and Investment
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Capital and Investment is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Investment Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment Of America 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 Growth are associated (or correlated) with Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment Of America has no effect on the direction of Capital World i.e., Capital World and Investment go up and down completely randomly.
Pair Corralation between Capital World and Investment
Assuming the 90 days horizon Capital World is expected to generate 1.49 times less return on investment than Investment. But when comparing it to its historical volatility, Capital World Growth is 1.05 times less risky than Investment. It trades about 0.09 of its potential returns per unit of risk. Investment Of America is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 3,974 in Investment Of America on September 3, 2024 and sell it today you would earn a total of 2,329 from holding Investment Of America or generate 58.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Growth vs. Investment Of America
Performance |
| Timeline |
| Capital World Growth |
| Investment Of America |
Capital World and Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Investment
The main advantage of trading using opposite Capital World and Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Investment 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 Investment will offset losses from the drop in Investment's long position.| Capital World vs. Capital Income Builder | Capital World vs. Growth Fund Of | Capital World vs. American Funds Fundamental | Capital World vs. Income Fund Of |
| Investment vs. New World Fund | Investment vs. Washington Mutual Investors | Investment vs. Smallcap World Fund | Investment vs. Capital World Growth |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. |