Correlation Between Capital World and Capital World

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Can any of the company-specific risk be diversified away by investing in both Capital World 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 Capital World and Capital World 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 Capital World Growth, you can compare the effects of market volatilities on Capital World 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 Capital World with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Capital World.

Diversification Opportunities for Capital World and Capital World

1.0
  Correlation Coefficient

No risk reduction

The 3 months correlation between Capital and Capital is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding CAPITAL WORLD GROWTH 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 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 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 Capital World i.e., Capital World and Capital World go up and down completely randomly.

Pair Corralation between Capital World and Capital World

Assuming the 90 days horizon Capital World Growth is expected to generate 1.01 times more return on investment than Capital World. However, Capital World is 1.01 times more volatile than Capital World Growth. It trades about 0.25 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.26 per unit of risk. If you would invest  6,239  in Capital World Growth on December 30, 2023 and sell it today you would earn a total of  233.00  from holding Capital World Growth or generate 3.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

CAPITAL WORLD GROWTH  vs.  CAPITAL WORLD GROWTH

 Performance 
       Timeline  
Capital World Growth 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Capital World Growth are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Capital World may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Capital World Growth 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Capital World Growth are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Capital World may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Capital World and Capital World Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Capital World and Capital World

The main advantage of trading using opposite Capital World and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World 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.
The idea behind Capital World Growth and Capital World Growth 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 Stocks Directory module to find actively traded stocks across global markets.

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