Correlation Between Capital World and Multisector Bond
Can any of the company-specific risk be diversified away by investing in both Capital World and Multisector 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 Multisector 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 Multisector Bond Sma, you can compare the effects of market volatilities on Capital World and Multisector 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 Multisector Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Multisector Bond.
Diversification Opportunities for Capital World and Multisector Bond
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and Multisector is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Bond and Multisector Bond Sma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multisector Bond Sma 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 Multisector Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multisector Bond Sma has no effect on the direction of Capital World i.e., Capital World and Multisector Bond go up and down completely randomly.
Pair Corralation between Capital World and Multisector Bond
Assuming the 90 days horizon Capital World is expected to generate 23.89 times less return on investment than Multisector Bond. In addition to that, Capital World is 1.45 times more volatile than Multisector Bond Sma. It trades about 0.01 of its total potential returns per unit of risk. Multisector Bond Sma is currently generating about 0.29 per unit of volatility. If you would invest 1,346 in Multisector Bond Sma on August 31, 2024 and sell it today you would earn a total of 26.00 from holding Multisector Bond Sma or generate 1.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Bond vs. Multisector Bond Sma
Performance |
| Timeline |
| Capital World Bond |
| Multisector Bond Sma |
Capital World and Multisector Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Multisector Bond
The main advantage of trading using opposite Capital World and Multisector Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Multisector 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 Multisector Bond will offset losses from the drop in Multisector Bond's long position.| Capital World vs. Lord Abbett Government | Capital World vs. Franklin Government Money | Capital World vs. Virtus Seix Government | Capital World vs. Dws Government Money |
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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