Correlation Between Growth Income and Capital World
Can any of the company-specific risk be diversified away by investing in both Growth Income 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 Growth Income and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Income Fund and Capital World Growth, you can compare the effects of market volatilities on Growth Income 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 Growth Income with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Income and Capital World.
Diversification Opportunities for Growth Income and Capital World
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Growth and Capital is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Growth Income 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 Growth Income 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 Growth Income 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 Growth Income i.e., Growth Income and Capital World go up and down completely randomly.
Pair Corralation between Growth Income and Capital World
Assuming the 90 days horizon Growth Income Fund is expected to generate 1.08 times more return on investment than Capital World. However, Growth Income is 1.08 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 0.08 per unit of risk. If you would invest 2,422 in Growth Income Fund on August 27, 2024 and sell it today you would earn a total of 1,044 from holding Growth Income Fund or generate 43.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Income Fund vs. Capital World Growth
Performance |
| Timeline |
| Growth Income |
| Capital World Growth |
Growth Income and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Income and Capital World
The main advantage of trading using opposite Growth Income and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Income 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.| Growth Income vs. Counterpoint Tactical Municipal | Growth Income vs. Baird Strategic Municipal | Growth Income vs. Ishares Municipal Bond | Growth Income vs. Bbh Intermediate Municipal |
| 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world |