Correlation Between Capital Growth and International Fund
Can any of the company-specific risk be diversified away by investing in both Capital Growth and International 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 International 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 International Fund International, you can compare the effects of market volatilities on Capital Growth and International 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 International Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Growth and International Fund.
Diversification Opportunities for Capital Growth and International Fund
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Capital and International is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Capital Growth Fund and International Fund Internation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Fund 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 International Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Fund has no effect on the direction of Capital Growth i.e., Capital Growth and International Fund go up and down completely randomly.
Pair Corralation between Capital Growth and International Fund
Assuming the 90 days horizon Capital Growth Fund is expected to generate 0.9 times more return on investment than International Fund. However, Capital Growth Fund is 1.11 times less risky than International Fund. It trades about 0.08 of its potential returns per unit of risk. International Fund International is currently generating about 0.0 per unit of risk. If you would invest 1,364 in Capital Growth Fund on September 3, 2024 and sell it today you would earn a total of 106.00 from holding Capital Growth Fund or generate 7.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Growth Fund vs. International Fund Internation
Performance |
| Timeline |
| Capital Growth |
| International Fund |
Capital Growth and International Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Growth and International Fund
The main advantage of trading using opposite Capital Growth and International Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Growth position performs unexpectedly, International 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 International Fund will offset losses from the drop in International Fund's long position.| Capital Growth vs. American Funds Capital | Capital Growth vs. American Funds Capital | Capital Growth vs. Capital World Growth | Capital Growth vs. Capital World Growth |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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