Correlation Between Capital World and Capital Growth
Can any of the company-specific risk be diversified away by investing in both Capital World and Capital Growth 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 Growth 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 Growth Fund, you can compare the effects of market volatilities on Capital World and Capital Growth 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 Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Capital Growth.
Diversification Opportunities for Capital World and Capital Growth
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Capital and Capital is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Capital Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Growth 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 Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Growth has no effect on the direction of Capital World i.e., Capital World and Capital Growth go up and down completely randomly.
Pair Corralation between Capital World and Capital Growth
Assuming the 90 days horizon Capital World is expected to generate 1.14 times less return on investment than Capital Growth. But when comparing it to its historical volatility, Capital World Growth is 1.02 times less risky than Capital Growth. It trades about 0.13 of its potential returns per unit of risk. Capital Growth Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,113 in Capital Growth Fund on September 1, 2024 and sell it today you would earn a total of 357.00 from holding Capital Growth Fund or generate 32.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Growth vs. Capital Growth Fund
Performance |
| Timeline |
| Capital World Growth |
| Capital Growth |
Capital World and Capital Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Capital Growth
The main advantage of trading using opposite Capital World and Capital Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Capital Growth 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 Growth will offset losses from the drop in Capital Growth's long position.| Capital World vs. Falcon Focus Scv | Capital World vs. Volumetric Fund Volumetric | Capital World vs. Iaadx | Capital World vs. Western Asset Municipal |
| Capital Growth vs. International Fund International | Capital Growth vs. Emerging Markets Fund | Capital Growth vs. Science Technology Fund | Capital Growth vs. Aggressive Growth Fund |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |