Correlation Between Capital Growth and Income Fund
Can any of the company-specific risk be diversified away by investing in both Capital Growth and Income Fund 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 Income Fund 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 Income Fund Income, you can compare the effects of market volatilities on Capital Growth and Income Fund 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 Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Growth and Income Fund.
Diversification Opportunities for Capital Growth and Income Fund
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Income is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Capital Growth Fund and Income Fund Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund Income 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 Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund Income has no effect on the direction of Capital Growth i.e., Capital Growth and Income Fund go up and down completely randomly.
Pair Corralation between Capital Growth and Income Fund
Assuming the 90 days horizon Capital Growth Fund is expected to generate 2.53 times more return on investment than Income Fund. However, Capital Growth is 2.53 times more volatile than Income Fund Income. It trades about 0.18 of its potential returns per unit of risk. Income Fund Income is currently generating about 0.3 per unit of risk. If you would invest 1,280 in Capital Growth Fund on November 8, 2024 and sell it today you would earn a total of 33.00 from holding Capital Growth Fund or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Capital Growth Fund vs. Income Fund Income
Performance |
| Timeline |
| Capital Growth |
| Income Fund Income |
Capital Growth and Income Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Growth and Income Fund
The main advantage of trading using opposite Capital Growth and Income Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Growth position performs unexpectedly, Income Fund 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 Income Fund will offset losses from the drop in Income Fund's long position.| Capital Growth vs. Diversified Income Fund | Capital Growth vs. Allianzgi Diversified Income | Capital Growth vs. Delaware Limited Term Diversified | Capital Growth vs. Jhancock Diversified Macro |
| Income Fund vs. Barings Active Short | Income Fund vs. Angel Oak Multi Strategy | Income Fund vs. Artisan Developing World | Income Fund vs. Aqr Sustainable Long Short |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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