Correlation Between Capital World and Federated Kaufmann
Can any of the company-specific risk be diversified away by investing in both Capital World and Federated Kaufmann 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 Federated Kaufmann 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 Federated Kaufmann Large, you can compare the effects of market volatilities on Capital World and Federated Kaufmann 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 Federated Kaufmann. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Federated Kaufmann.
Diversification Opportunities for Capital World and Federated Kaufmann
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Federated is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Federated Kaufmann Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federated Kaufmann Large 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 Federated Kaufmann. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federated Kaufmann Large has no effect on the direction of Capital World i.e., Capital World and Federated Kaufmann go up and down completely randomly.
Pair Corralation between Capital World and Federated Kaufmann
Assuming the 90 days horizon Capital World Growth is expected to generate 0.52 times more return on investment than Federated Kaufmann. However, Capital World Growth is 1.94 times less risky than Federated Kaufmann. It trades about 0.09 of its potential returns per unit of risk. Federated Kaufmann Large is currently generating about 0.04 per unit of risk. If you would invest 5,031 in Capital World Growth on August 31, 2024 and sell it today you would earn a total of 1,867 from holding Capital World Growth or generate 37.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Capital World Growth vs. Federated Kaufmann Large
Performance |
| Timeline |
| Capital World Growth |
| Federated Kaufmann Large |
Capital World and Federated Kaufmann Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and Federated Kaufmann
The main advantage of trading using opposite Capital World and Federated Kaufmann positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Federated Kaufmann 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 Federated Kaufmann will offset losses from the drop in Federated Kaufmann's long position.| Capital World vs. Franklin Lifesmart Retirement | Capital World vs. Dimensional Retirement Income | Capital World vs. Jp Morgan Smartretirement | Capital World vs. Strategic Allocation Moderate |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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