Correlation Between Capital World and Driehaus Multi-asset
Can any of the company-specific risk be diversified away by investing in both Capital World and Driehaus Multi-asset 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 Driehaus Multi-asset 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 Driehaus Multi Asset Growth, you can compare the effects of market volatilities on Capital World and Driehaus Multi-asset 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 Driehaus Multi-asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Driehaus Multi-asset.
Diversification Opportunities for Capital World and Driehaus Multi-asset
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Driehaus is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Driehaus Multi Asset Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Driehaus Multi Asset 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 Driehaus Multi-asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Driehaus Multi Asset has no effect on the direction of Capital World i.e., Capital World and Driehaus Multi-asset go up and down completely randomly.
Pair Corralation between Capital World and Driehaus Multi-asset
Assuming the 90 days horizon Capital World is expected to generate 2.44 times less return on investment than Driehaus Multi-asset. But when comparing it to its historical volatility, Capital World Growth is 1.2 times less risky than Driehaus Multi-asset. It trades about 0.18 of its potential returns per unit of risk. Driehaus Multi Asset Growth is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 1,628 in Driehaus Multi Asset Growth on September 1, 2024 and sell it today you would earn a total of 90.00 from holding Driehaus Multi Asset Growth or generate 5.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Growth vs. Driehaus Multi Asset Growth
Performance |
| Timeline |
| Capital World Growth |
| Driehaus Multi Asset |
Capital World and Driehaus Multi-asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Driehaus Multi-asset
The main advantage of trading using opposite Capital World and Driehaus Multi-asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Driehaus Multi-asset 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 Driehaus Multi-asset will offset losses from the drop in Driehaus Multi-asset's long position.| Capital World vs. Franklin Emerging Market | Capital World vs. Ep Emerging Markets | Capital World vs. Doubleline Emerging Markets | Capital World vs. Ashmore Emerging Markets |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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