Correlation Between Balanced Fund and Capital World
Can any of the company-specific risk be diversified away by investing in both Balanced Fund 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 Balanced Fund and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Balanced Fund Retail and Capital World Bond, you can compare the effects of market volatilities on Balanced Fund 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 Balanced Fund with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Balanced Fund and Capital World.
Diversification Opportunities for Balanced Fund and Capital World
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Balanced and Capital is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Balanced Fund Retail and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond and Balanced Fund 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 Balanced Fund Retail 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 Bond has no effect on the direction of Balanced Fund i.e., Balanced Fund and Capital World go up and down completely randomly.
Pair Corralation between Balanced Fund and Capital World
Assuming the 90 days horizon Balanced Fund Retail is expected to generate 1.42 times more return on investment than Capital World. However, Balanced Fund is 1.42 times more volatile than Capital World Bond. It trades about 0.1 of its potential returns per unit of risk. Capital World Bond is currently generating about 0.12 per unit of risk. If you would invest 1,438 in Balanced Fund Retail on September 14, 2024 and sell it today you would earn a total of 12.00 from holding Balanced Fund Retail or generate 0.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Balanced Fund Retail vs. Capital World Bond
Performance |
| Timeline |
| Balanced Fund Retail |
| Capital World Bond |
Balanced Fund and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Balanced Fund and Capital World
The main advantage of trading using opposite Balanced Fund and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Balanced Fund 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.| Balanced Fund vs. Muirfield Fund Retail | Balanced Fund vs. Dynamic Growth Fund | Balanced Fund vs. Infrastructure Fund Retail | Balanced Fund vs. Quantex Fund Retail |
| Capital World vs. Hewitt Money Market | Capital World vs. Ab Government Exchange | Capital World vs. Prudential Government Money | Capital World vs. Hsbc Treasury Money |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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