Correlation Between Capital Appreciation and Regional Bank
Can any of the company-specific risk be diversified away by investing in both Capital Appreciation and Regional Bank 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 Regional Bank 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 Regional Bank Fund, you can compare the effects of market volatilities on Capital Appreciation and Regional Bank 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 Regional Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Appreciation and Regional Bank.
Diversification Opportunities for Capital Appreciation and Regional Bank
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Regional is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Capital Appreciation Fund and Regional Bank Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Bank 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 Regional Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Bank has no effect on the direction of Capital Appreciation i.e., Capital Appreciation and Regional Bank go up and down completely randomly.
Pair Corralation between Capital Appreciation and Regional Bank
Assuming the 90 days horizon Capital Appreciation is expected to generate 3.51 times less return on investment than Regional Bank. But when comparing it to its historical volatility, Capital Appreciation Fund is 2.66 times less risky than Regional Bank. It trades about 0.17 of its potential returns per unit of risk. Regional Bank Fund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 3,000 in Regional Bank Fund on August 29, 2024 and sell it today you would earn a total of 431.00 from holding Regional Bank Fund or generate 14.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Capital Appreciation Fund vs. Regional Bank Fund
Performance |
| Timeline |
| Capital Appreciation |
| Regional Bank |
Capital Appreciation and Regional Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Appreciation and Regional Bank
The main advantage of trading using opposite Capital Appreciation and Regional Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Appreciation position performs unexpectedly, Regional Bank 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 Regional Bank will offset losses from the drop in Regional Bank's long position.| Capital Appreciation vs. Locorr Dynamic Equity | Capital Appreciation vs. Ultra Short Fixed Income | Capital Appreciation vs. Ms Global Fixed | Capital Appreciation vs. Calamos Global Equity |
| Regional Bank vs. Small Pany Growth | Regional Bank vs. Touchstone Small Cap | Regional Bank vs. Fisher Small Cap | Regional Bank vs. Ab Small Cap |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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