Correlation Between Capital World and Washington Mutual
Can any of the company-specific risk be diversified away by investing in both Capital World and Washington Mutual 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 Washington Mutual 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 Washington Mutual Investors, you can compare the effects of market volatilities on Capital World and Washington Mutual 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 Washington Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Washington Mutual.
Diversification Opportunities for Capital World and Washington Mutual
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Capital and Washington is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Washington Mutual Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Washington Mutual 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 Washington Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Washington Mutual has no effect on the direction of Capital World i.e., Capital World and Washington Mutual go up and down completely randomly.
Pair Corralation between Capital World and Washington Mutual
Assuming the 90 days horizon Capital World Growth is expected to under-perform the Washington Mutual. In addition to that, Capital World is 1.17 times more volatile than Washington Mutual Investors. It trades about -0.04 of its total potential returns per unit of risk. Washington Mutual Investors is currently generating about -0.04 per unit of volatility. If you would invest 6,538 in Washington Mutual Investors on October 26, 2024 and sell it today you would lose (121.00) from holding Washington Mutual Investors or give up 1.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Growth vs. Washington Mutual Investors
Performance |
| Timeline |
| Capital World Growth |
| Washington Mutual |
Capital World and Washington Mutual Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Washington Mutual
The main advantage of trading using opposite Capital World and Washington Mutual positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Washington Mutual 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 Washington Mutual will offset losses from the drop in Washington Mutual's long position.| Capital World vs. Jpmorgan Emerging Markets | Capital World vs. Growth Strategy Fund | Capital World vs. Vanguard Lifestrategy Moderate | Capital World vs. Morgan Stanley Emerging |
| Washington Mutual vs. The Gold Bullion | Washington Mutual vs. Goldman Sachs Strategic | Washington Mutual vs. Gabelli Gold Fund | Washington Mutual vs. Deutsche Gold Precious |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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