Correlation Between Capital Income and Deutsche Real

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

0.93

Correlation Coefficient

Capital Income  Deutsche Real

Almost no diversification

The 3 months correlation between Capital and Deutsche is 0.93. 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 under-perform the Deutsche Real. But the mutual fund apears to be less risky and, when comparing its historical volatility, Capital Income Builder is 1.24 times less risky than Deutsche Real. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Deutsche Real Assets is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,144  in Deutsche Real Assets on January 25, 2024 and sell it today you would lose (11.00) from holding Deutsche Real Assets or give up 0.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Capital Income Builder  vs.  Deutsche Real Assets

Capital Me Builder

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Income Builder are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, 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

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Deutsche Real Assets are ranked lower than 5 (%) 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.