Correlation Between Us Global and Capital World
Can any of the company-specific risk be diversified away by investing in both Us Global 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 Us Global and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Global Leaders and Capital World Growth, you can compare the effects of market volatilities on Us Global 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 Us Global with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Global and Capital World.
Diversification Opportunities for Us Global and Capital World
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between USGLX and Capital is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Us Global Leaders 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 Us Global 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 Us Global Leaders 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 Us Global i.e., Us Global and Capital World go up and down completely randomly.
Pair Corralation between Us Global and Capital World
Assuming the 90 days horizon Us Global Leaders is expected to generate 1.22 times more return on investment than Capital World. However, Us Global is 1.22 times more volatile than Capital World Growth. It trades about 0.1 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.09 per unit of risk. If you would invest 5,025 in Us Global Leaders on September 1, 2024 and sell it today you would earn a total of 2,554 from holding Us Global Leaders or generate 50.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Global Leaders vs. Capital World Growth
Performance |
| Timeline |
| Us Global Leaders |
| Capital World Growth |
Us Global and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Global and Capital World
The main advantage of trading using opposite Us Global and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Global 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.| Us Global vs. Regional Bank Fund | Us Global vs. Regional Bank Fund | Us Global vs. Multimanager Lifestyle Balanced | Us Global vs. Multimanager Lifestyle Servative |
| Capital World vs. Commonwealth Global Fund | Capital World vs. Barings Global Floating | Capital World vs. Rbc Global Opportunities | Capital World vs. Us Global Leaders |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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