Correlation Between Capital Income and American Funds
Can any of the company-specific risk be diversified away by investing in both Capital Income and American Funds 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 American Funds 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 American Funds Retirement, you can compare the effects of market volatilities on Capital Income and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and American Funds.
Diversification Opportunities for Capital Income and American Funds
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and American is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and American Funds Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Retirement 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Retirement has no effect on the direction of Capital Income i.e., Capital Income and American Funds go up and down completely randomly.
Pair Corralation between Capital Income and American Funds
Assuming the 90 days horizon Capital Income Builder is expected to generate 1.58 times more return on investment than American Funds. However, Capital Income is 1.58 times more volatile than American Funds Retirement. It trades about 0.09 of its potential returns per unit of risk. American Funds Retirement is currently generating about 0.11 per unit of risk. If you would invest 6,360 in Capital Income Builder on November 3, 2024 and sell it today you would earn a total of 741.00 from holding Capital Income Builder or generate 11.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Income Builder vs. American Funds Retirement
Performance |
| Timeline |
| Capital Income Builder |
| American Funds Retirement |
Capital Income and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and American Funds
The main advantage of trading using opposite Capital Income and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Capital Income vs. Aqr Long Short Equity | Capital Income vs. Qs Global Equity | Capital Income vs. Dreyfusstandish Global Fixed | Capital Income vs. Dws Equity Sector |
| American Funds vs. Adams Natural Resources | American Funds vs. Transamerica Mlp Energy | American Funds vs. Jennison Natural Resources | American Funds vs. Thrivent Natural Resources |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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