Correlation Between Quantitative Longshort and Capital World
Can any of the company-specific risk be diversified away by investing in both Quantitative Longshort 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 Quantitative Longshort and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quantitative Longshort Equity and Capital World Growth, you can compare the effects of market volatilities on Quantitative Longshort 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 Quantitative Longshort with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quantitative Longshort and Capital World.
Diversification Opportunities for Quantitative Longshort and Capital World
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Quantitative and Capital is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Quantitative Longshort Equity and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Quantitative Longshort 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 Quantitative Longshort Equity 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 Growth has no effect on the direction of Quantitative Longshort i.e., Quantitative Longshort and Capital World go up and down completely randomly.
Pair Corralation between Quantitative Longshort and Capital World
Assuming the 90 days horizon Quantitative Longshort Equity is expected to generate 0.9 times more return on investment than Capital World. However, Quantitative Longshort Equity is 1.12 times less risky than Capital World. It trades about 0.27 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.17 per unit of risk. If you would invest 1,427 in Quantitative Longshort Equity on September 3, 2024 and sell it today you would earn a total of 43.00 from holding Quantitative Longshort Equity or generate 3.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Quantitative Longshort Equity vs. Capital World Growth
Performance |
| Timeline |
| Quantitative Longshort |
| Capital World Growth |
Quantitative Longshort and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quantitative Longshort and Capital World
The main advantage of trading using opposite Quantitative Longshort and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quantitative Longshort 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.| Quantitative Longshort vs. Neuberger Berman Long | Quantitative Longshort vs. Diamond Hill Long Short | Quantitative Longshort vs. Diamond Hill Long Short |
| Capital World vs. Western Assets Emerging | Capital World vs. Artisan Emerging Markets | Capital World vs. Shelton Emerging Markets | Capital World vs. Transamerica Emerging Markets |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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