Correlation Between Capital Growth and Capital Management
Can any of the company-specific risk be diversified away by investing in both Capital Growth and Capital Management 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 Management 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 Management Mid Cap, you can compare the effects of market volatilities on Capital Growth and Capital Management 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 Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Growth and Capital Management.
Diversification Opportunities for Capital Growth and Capital Management
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Capital and Capital is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Capital Growth Fund and Capital Management Mid Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Management Mid 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 Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Management Mid has no effect on the direction of Capital Growth i.e., Capital Growth and Capital Management go up and down completely randomly.
Pair Corralation between Capital Growth and Capital Management
Assuming the 90 days horizon Capital Growth Fund is expected to generate 0.99 times more return on investment than Capital Management. However, Capital Growth Fund is 1.01 times less risky than Capital Management. It trades about 0.06 of its potential returns per unit of risk. Capital Management Mid Cap is currently generating about 0.02 per unit of risk. If you would invest 1,052 in Capital Growth Fund on November 27, 2024 and sell it today you would earn a total of 242.00 from holding Capital Growth Fund or generate 23.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 92.14% |
| Values | Daily Returns |
Capital Growth Fund vs. Capital Management Mid Cap
Performance |
| Timeline |
| Capital Growth |
| Capital Management Mid |
Capital Growth and Capital Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Growth and Capital Management
The main advantage of trading using opposite Capital Growth and Capital Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Growth position performs unexpectedly, Capital Management 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 Management will offset losses from the drop in Capital Management's long position.| Capital Growth vs. Intal High Relative | Capital Growth vs. Siit High Yield | Capital Growth vs. Transamerica High Yield | Capital Growth vs. Gmo High Yield |
| Capital Management vs. T Rowe Price | Capital Management vs. T Rowe Price | Capital Management vs. Jpmorgan Trust I | Capital Management vs. Pace Select Advisors |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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