Correlation Between Capital Growth and Capital World
Can any of the company-specific risk be diversified away by investing in both Capital Growth and Capital World 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 Growth and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Growth Fund and Capital World Growth, you can compare the effects of market volatilities on Capital Growth and Capital World 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 Growth with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Growth and Capital World.
Diversification Opportunities for Capital Growth and Capital World
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Capital and Capital is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Capital Growth Fund and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Capital Growth 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 Growth Fund are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Capital Growth i.e., Capital Growth and Capital World go up and down completely randomly.
Pair Corralation between Capital Growth and Capital World
Assuming the 90 days horizon Capital Growth Fund is expected to generate 0.98 times more return on investment than Capital World. However, Capital Growth Fund is 1.02 times less risky than Capital World. It trades about 0.11 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.0 per unit of risk. If you would invest 1,453 in Capital Growth Fund on August 28, 2024 and sell it today you would earn a total of 21.00 from holding Capital Growth Fund or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Growth Fund vs. Capital World Growth
Performance |
| Timeline |
| Capital Growth |
| Capital World Growth |
Capital Growth and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Growth and Capital World
The main advantage of trading using opposite Capital Growth and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Growth position performs unexpectedly, Capital World 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 World will offset losses from the drop in Capital World's long position.| Capital Growth vs. Emerging Markets Fund | Capital Growth vs. High Income Fund | Capital Growth vs. International Fund International | Capital Growth vs. Growth Income Fund |
| Capital World vs. Aqr Long Short Equity | Capital World vs. Siit Emerging Markets | Capital World vs. Ep Emerging Markets | Capital World vs. Western Asset Diversified |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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