Correlation Between Capital Income and Sextant Global
Can any of the company-specific risk be diversified away by investing in both Capital Income and Sextant Global 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 Income and Sextant Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Income Builder and Sextant Global High, you can compare the effects of market volatilities on Capital Income and Sextant Global 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 Income with a short position of Sextant Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Sextant Global.
Diversification Opportunities for Capital Income and Sextant Global
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Capital and Sextant is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Sextant Global High in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sextant Global High and Capital Income 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 Income Builder are associated (or correlated) with Sextant Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sextant Global High has no effect on the direction of Capital Income i.e., Capital Income and Sextant Global go up and down completely randomly.
Pair Corralation between Capital Income and Sextant Global
Assuming the 90 days horizon Capital Income Builder is expected to generate 1.26 times more return on investment than Sextant Global. However, Capital Income is 1.26 times more volatile than Sextant Global High. It trades about -0.23 of its potential returns per unit of risk. Sextant Global High is currently generating about -0.34 per unit of risk. If you would invest 7,301 in Capital Income Builder on October 9, 2024 and sell it today you would lose (370.00) from holding Capital Income Builder or give up 5.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Income Builder vs. Sextant Global High
Performance |
| Timeline |
| Capital Income Builder |
| Sextant Global High |
Capital Income and Sextant Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Sextant Global
The main advantage of trading using opposite Capital Income and Sextant Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Sextant Global 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 Sextant Global will offset losses from the drop in Sextant Global's long position.| Capital Income vs. Glg Intl Small | Capital Income vs. Needham Small Cap | Capital Income vs. Champlain Small | Capital Income vs. Small Pany Growth |
| Sextant Global vs. Sextant Growth Fund | Sextant Global vs. Sextant International Fund | Sextant Global vs. Sextant Bond Income | Sextant Global vs. Sextant Short Term Bond |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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