Correlation Between Capital World and Global Bond
Can any of the company-specific risk be diversified away by investing in both Capital World and Global Bond 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 World and Global Bond into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital World Bond and Global Bond Fund, you can compare the effects of market volatilities on Capital World and Global Bond 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 World with a short position of Global Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Global Bond.
Diversification Opportunities for Capital World and Global Bond
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Capital and Global is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Bond and Global Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Bond Fund and Capital World 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 World Bond are associated (or correlated) with Global Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Bond Fund has no effect on the direction of Capital World i.e., Capital World and Global Bond go up and down completely randomly.
Pair Corralation between Capital World and Global Bond
Assuming the 90 days horizon Capital World Bond is expected to generate 1.17 times more return on investment than Global Bond. However, Capital World is 1.17 times more volatile than Global Bond Fund. It trades about -0.11 of its potential returns per unit of risk. Global Bond Fund is currently generating about -0.14 per unit of risk. If you would invest 1,615 in Capital World Bond on September 13, 2024 and sell it today you would lose (25.00) from holding Capital World Bond or give up 1.55% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.67% |
| Values | Daily Returns |
Capital World Bond vs. Global Bond Fund
Performance |
| Timeline |
| Capital World Bond |
| Global Bond Fund |
Capital World and Global Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Global Bond
The main advantage of trading using opposite Capital World and Global Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Global Bond 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 Global Bond will offset losses from the drop in Global Bond's long position.| Capital World vs. Global Gold Fund | Capital World vs. Vy Goldman Sachs | Capital World vs. Goldman Sachs Clean | Capital World vs. James Balanced Golden |
| Global Bond vs. Jhancock Global Equity | Global Bond vs. Ab Global Risk | Global Bond vs. Ab Global Bond | Global Bond vs. Scharf Global Opportunity |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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