Correlation Between Growth Opportunities and Capital Income
Can any of the company-specific risk be diversified away by investing in both Growth Opportunities and Capital Income 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 Growth Opportunities and Capital Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Opportunities Fund and Capital Income Builder, you can compare the effects of market volatilities on Growth Opportunities and Capital Income 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 Growth Opportunities with a short position of Capital Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Opportunities and Capital Income.
Diversification Opportunities for Growth Opportunities and Capital Income
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between GROWTH and Capital is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Growth Opportunities Fund and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder and Growth Opportunities 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 Growth Opportunities Fund are associated (or correlated) with Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of Growth Opportunities i.e., Growth Opportunities and Capital Income go up and down completely randomly.
Pair Corralation between Growth Opportunities and Capital Income
Assuming the 90 days horizon Growth Opportunities Fund is expected to generate 2.4 times more return on investment than Capital Income. However, Growth Opportunities is 2.4 times more volatile than Capital Income Builder. It trades about 0.34 of its potential returns per unit of risk. Capital Income Builder is currently generating about 0.13 per unit of risk. If you would invest 5,471 in Growth Opportunities Fund on September 1, 2024 and sell it today you would earn a total of 385.00 from holding Growth Opportunities Fund or generate 7.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Growth Opportunities Fund vs. Capital Income Builder
Performance |
| Timeline |
| Growth Opportunities |
| Capital Income Builder |
Growth Opportunities and Capital Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Opportunities and Capital Income
The main advantage of trading using opposite Growth Opportunities and Capital Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Opportunities position performs unexpectedly, Capital Income 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 Income will offset losses from the drop in Capital Income's long position.| Growth Opportunities vs. Virtus Real Estate | Growth Opportunities vs. Prudential Real Estate | Growth Opportunities vs. Deutsche Real Estate | Growth Opportunities vs. Goldman Sachs Real |
| Capital Income vs. Balanced Fund Investor | Capital Income vs. Volumetric Fund Volumetric | Capital Income vs. Growth Opportunities Fund | Capital Income vs. Small Cap Stock |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
Other Complementary Tools
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |