Correlation Between Capital Income and Deutsche Real

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Can any of the company-specific risk be diversified away by investing in both Capital Income and Deutsche Real 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 Income and Deutsche Real into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Income Builder and Deutsche Real Assets, you can compare the effects of market volatilities on Capital Income and Deutsche Real 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 Income with a short position of Deutsche Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Deutsche Real.

Diversification Opportunities for Capital Income and Deutsche Real

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Capital and Deutsche is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding CAPITAL INCOME BUILDER and DEUTSCHE REAL ASSETS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deutsche Real Assets and Capital 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 Capital Income Builder are associated (or correlated) with Deutsche Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deutsche Real Assets has no effect on the direction of Capital Income i.e., Capital Income and Deutsche Real go up and down completely randomly.

Pair Corralation between Capital Income and Deutsche Real

Assuming the 90 days horizon Capital Income Builder is expected to generate 0.76 times more return on investment than Deutsche Real. However, Capital Income Builder is 1.31 times less risky than Deutsche Real. It trades about 0.09 of its potential returns per unit of risk. Deutsche Real Assets is currently generating about 0.04 per unit of risk. If you would invest  6,265  in Capital Income Builder on December 29, 2023 and sell it today you would earn a total of  550.00  from holding Capital Income Builder or generate 8.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.47%
ValuesDaily Returns

CAPITAL INCOME BUILDER  vs.  DEUTSCHE REAL ASSETS

 Performance 
       Timeline  
Capital Income Builder 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Capital Income Builder are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, Capital Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Deutsche Real Assets 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Real Assets are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Deutsche Real is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Capital Income and Deutsche Real Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Capital Income and Deutsche Real

The main advantage of trading using opposite Capital Income and Deutsche Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Deutsche Real 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 Deutsche Real will offset losses from the drop in Deutsche Real's long position.
The idea behind Capital Income Builder and Deutsche Real Assets pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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