Correlation Between Capital World and Capital Appreciation
Can any of the company-specific risk be diversified away by investing in both Capital World and Capital Appreciation 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 Appreciation 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 Appreciation Fund, you can compare the effects of market volatilities on Capital World and Capital Appreciation 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 Appreciation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Capital Appreciation.
Diversification Opportunities for Capital World and Capital Appreciation
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Capital is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Capital Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Appreciation 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 Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Appreciation has no effect on the direction of Capital World i.e., Capital World and Capital Appreciation go up and down completely randomly.
Pair Corralation between Capital World and Capital Appreciation
Assuming the 90 days horizon Capital World Growth is expected to generate 0.61 times more return on investment than Capital Appreciation. However, Capital World Growth is 1.64 times less risky than Capital Appreciation. It trades about 0.06 of its potential returns per unit of risk. Capital Appreciation Fund is currently generating about -0.01 per unit of risk. If you would invest 6,554 in Capital World Growth on November 27, 2024 and sell it today you would earn a total of 50.00 from holding Capital World Growth or generate 0.76% 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. Capital Appreciation Fund
Performance |
| Timeline |
| Capital World Growth |
| Capital Appreciation |
Capital World and Capital Appreciation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Capital Appreciation
The main advantage of trading using opposite Capital World and Capital Appreciation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Capital Appreciation 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 Appreciation will offset losses from the drop in Capital Appreciation's long position.| Capital World vs. Blackrock Smid Cap Growth | Capital World vs. Valic Company I | Capital World vs. T Rowe Price | Capital World vs. T Rowe Price |
| Capital Appreciation vs. Dreyfusstandish Global Fixed | Capital Appreciation vs. Rbc Global Equity | Capital Appreciation vs. Barings Global Floating | Capital Appreciation vs. T Rowe Price |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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