Correlation Between Capital Income and Amcap Fund
Can any of the company-specific risk be diversified away by investing in both Capital Income and Amcap Fund 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 Amcap Fund 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 Amcap Fund Class, you can compare the effects of market volatilities on Capital Income and Amcap Fund 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 Amcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Amcap Fund.
Diversification Opportunities for Capital Income and Amcap Fund
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and Amcap is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Amcap Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amcap Fund Class 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 Amcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amcap Fund Class has no effect on the direction of Capital Income i.e., Capital Income and Amcap Fund go up and down completely randomly.
Pair Corralation between Capital Income and Amcap Fund
Assuming the 90 days horizon Capital Income is expected to generate 2.17 times less return on investment than Amcap Fund. But when comparing it to its historical volatility, Capital Income Builder is 1.79 times less risky than Amcap Fund. It trades about 0.09 of its potential returns per unit of risk. Amcap Fund Class is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 3,081 in Amcap Fund Class on August 28, 2024 and sell it today you would earn a total of 1,622 from holding Amcap Fund Class or generate 52.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Capital Income Builder vs. Amcap Fund Class
Performance |
| Timeline |
| Capital Income Builder |
| Amcap Fund Class |
Capital Income and Amcap Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Amcap Fund
The main advantage of trading using opposite Capital Income and Amcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Amcap Fund 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 Amcap Fund will offset losses from the drop in Amcap Fund's long position.| Capital Income vs. Income Fund Of | Capital Income vs. New World Fund | Capital Income vs. American Mutual Fund | Capital Income vs. American Mutual Fund |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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