Correlation Between Capital World and Ab Global

Can any of the company-specific risk be diversified away by investing in both Capital World and Ab Global 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 World and Ab Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Capital World Growth and Ab Global E, you can compare the effects of market volatilities on Capital World and Ab Global 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 World with a short position of Ab Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Ab Global.

Diversification Opportunities for Capital World and Ab Global

0.94

Correlation Coefficient

Capital World  Ab Global

Almost no diversification

The 3 months correlation between Capital and GCEAX is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Ab Global E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Global E and Capital World 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 World Growth are associated (or correlated) with Ab Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Global E has no effect on the direction of Capital World i.e., Capital World and Ab Global go up and down completely randomly.

Pair Corralation between Capital World and Ab Global

Assuming the 90 days horizon Capital World Growth is expected to under-perform the Ab Global. But the mutual fund apears to be less risky and, when comparing its historical volatility, Capital World Growth is 1.01 times less risky than Ab Global. The mutual fund trades about -0.12 of its potential returns per unit of risk. The Ab Global E is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,640  in Ab Global E on January 26, 2024 and sell it today you would lose (21.00) from holding Ab Global E or give up 1.28% of portfolio value over 90 days.

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

Capital World Growth  vs.  Ab Global E

Capital World Growth

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital World Growth are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Capital World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ab Global E

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ab Global E are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ab Global 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 World and Ab Global

The main advantage of trading using opposite Capital World and Ab Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Ab Global 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 Ab Global will offset losses from the drop in Ab Global's long position.

The idea behind Capital World Growth and Ab Global E 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.