Correlation Between Capital Appreciation and Capital Management
Can any of the company-specific risk be diversified away by investing in both Capital Appreciation and Capital Management 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 Appreciation and Capital Management into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Appreciation Fund and Capital Management Mid Cap, you can compare the effects of market volatilities on Capital Appreciation and Capital Management 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 Appreciation with a short position of Capital Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Appreciation and Capital Management.
Diversification Opportunities for Capital Appreciation and Capital Management
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Capital is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Capital Appreciation Fund and Capital Management Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Management Mid and Capital Appreciation 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 Appreciation Fund are associated (or correlated) with Capital Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Management Mid has no effect on the direction of Capital Appreciation i.e., Capital Appreciation and Capital Management go up and down completely randomly.
Pair Corralation between Capital Appreciation and Capital Management
Assuming the 90 days horizon Capital Appreciation Fund is expected to generate 1.53 times more return on investment than Capital Management. However, Capital Appreciation is 1.53 times more volatile than Capital Management Mid Cap. It trades about -0.01 of its potential returns per unit of risk. Capital Management Mid Cap is currently generating about -0.33 per unit of risk. If you would invest 1,559 in Capital Appreciation Fund on November 27, 2024 and sell it today you would lose (6.00) from holding Capital Appreciation Fund or give up 0.38% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Appreciation Fund vs. Capital Management Mid Cap
Performance |
| Timeline |
| Capital Appreciation |
| Capital Management Mid |
Capital Appreciation and Capital Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Appreciation and Capital Management
The main advantage of trading using opposite Capital Appreciation and Capital Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Appreciation position performs unexpectedly, Capital Management 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 Management will offset losses from the drop in Capital Management's long position.| Capital Appreciation vs. Dreyfusstandish Global Fixed | Capital Appreciation vs. Rbc Global Equity | Capital Appreciation vs. Barings Global Floating | Capital Appreciation vs. T Rowe Price |
| Capital Management vs. Touchstone Ultra Short | Capital Management vs. Cmg Ultra Short | Capital Management vs. Calvert Short Duration | Capital Management vs. T Rowe Price |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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