Correlation Between Capital World and Capital Group
Can any of the company-specific risk be diversified away by investing in both Capital World and Capital Group 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 Capital Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital World Growth and Capital Group Equity, you can compare the effects of market volatilities on Capital World and Capital Group 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 Capital Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Capital Group.
Diversification Opportunities for Capital World and Capital Group
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Capital and Capital is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Capital Group Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Group Equity 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 Growth are associated (or correlated) with Capital Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Group Equity has no effect on the direction of Capital World i.e., Capital World and Capital Group go up and down completely randomly.
Pair Corralation between Capital World and Capital Group
Assuming the 90 days horizon Capital World Growth is expected to under-perform the Capital Group. But the mutual fund apears to be less risky and, when comparing its historical volatility, Capital World Growth is 1.29 times less risky than Capital Group. The mutual fund trades about 0.0 of its potential returns per unit of risk. The Capital Group Equity is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 3,648 in Capital Group Equity on August 28, 2024 and sell it today you would earn a total of 109.00 from holding Capital Group Equity or generate 2.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Growth vs. Capital Group Equity
Performance |
| Timeline |
| Capital World Growth |
| Capital Group Equity |
Capital World and Capital Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Capital Group
The main advantage of trading using opposite Capital World and Capital Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Capital Group 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 Capital Group will offset losses from the drop in Capital Group's long position.| Capital World vs. Aqr Long Short Equity | Capital World vs. Siit Emerging Markets | Capital World vs. Ep Emerging Markets | Capital World vs. Western Asset Diversified |
| Capital Group vs. Emerging Markets Growth | Capital Group vs. Emerging Markets Growth | Capital Group vs. Emerging Markets Growth | Capital Group vs. Capital Group California |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |