Correlation Between Multisector Bond and Capital World
Can any of the company-specific risk be diversified away by investing in both Multisector Bond 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 Multisector Bond and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multisector Bond Sma and Capital World Growth, you can compare the effects of market volatilities on Multisector Bond 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 Multisector Bond with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multisector Bond and Capital World.
Diversification Opportunities for Multisector Bond and Capital World
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Multisector and Capital is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Multisector Bond Sma 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 Multisector Bond 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 Multisector Bond Sma 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 Multisector Bond i.e., Multisector Bond and Capital World go up and down completely randomly.
Pair Corralation between Multisector Bond and Capital World
Assuming the 90 days horizon Multisector Bond Sma is expected to generate 0.46 times more return on investment than Capital World. However, Multisector Bond Sma is 2.16 times less risky than Capital World. It trades about 0.39 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.18 per unit of risk. If you would invest 1,341 in Multisector Bond Sma on September 1, 2024 and sell it today you would earn a total of 31.00 from holding Multisector Bond Sma or generate 2.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multisector Bond Sma vs. Capital World Growth
Performance |
| Timeline |
| Multisector Bond Sma |
| Capital World Growth |
Multisector Bond and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multisector Bond and Capital World
The main advantage of trading using opposite Multisector Bond and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multisector Bond 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.| Multisector Bond vs. Siit High Yield | Multisector Bond vs. Msift High Yield | Multisector Bond vs. Valic Company I | Multisector Bond vs. Pace High Yield |
| Capital World vs. Income Fund Of | Capital World vs. New World Fund | Capital World vs. American Mutual Fund | Capital World vs. American Mutual Fund |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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