Correlation Between Growth Fund and Capital Income
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Capital Income 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 Growth Fund and Capital Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Of and Capital Income Builder, you can compare the effects of market volatilities on Growth Fund and Capital Income 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 Growth Fund with a short position of Capital Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Capital Income.
Diversification Opportunities for Growth Fund and Capital Income
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Growth and Capital is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder and Growth 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 Growth Fund Of are associated (or correlated) with Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of Growth Fund i.e., Growth Fund and Capital Income go up and down completely randomly.
Pair Corralation between Growth Fund and Capital Income
Assuming the 90 days horizon Growth Fund Of is expected to generate 2.12 times more return on investment than Capital Income. However, Growth Fund is 2.12 times more volatile than Capital Income Builder. It trades about 0.22 of its potential returns per unit of risk. Capital Income Builder is currently generating about 0.17 per unit of risk. If you would invest 6,905 in Growth Fund Of on September 5, 2024 and sell it today you would earn a total of 1,335 from holding Growth Fund Of or generate 19.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Of vs. Capital Income Builder
Performance |
| Timeline |
| Growth Fund |
| Capital Income Builder |
Growth Fund and Capital Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Capital Income
The main advantage of trading using opposite Growth Fund and Capital Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Capital Income 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 Income will offset losses from the drop in Capital Income's long position.| Growth Fund vs. Income Fund Of | Growth Fund vs. New World Fund | Growth Fund vs. American Mutual Fund | Growth Fund vs. American Mutual Fund |
| Capital Income vs. Income Fund Of | Capital Income vs. Capital World Growth | Capital Income vs. American Balanced Fund | Capital Income vs. Growth Fund Of |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Other Complementary Tools
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |