Correlation Between Cornerstone Equity and Capital World
Can any of the company-specific risk be diversified away by investing in both Cornerstone Equity 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 Cornerstone Equity and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cornerstone Equity Fund and Capital World Growth, you can compare the effects of market volatilities on Cornerstone Equity 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 Cornerstone Equity with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cornerstone Equity and Capital World.
Diversification Opportunities for Cornerstone Equity and Capital World
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Cornerstone and Capital is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Cornerstone Equity 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 Cornerstone Equity 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 Cornerstone Equity 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 Cornerstone Equity i.e., Cornerstone Equity and Capital World go up and down completely randomly.
Pair Corralation between Cornerstone Equity and Capital World
Assuming the 90 days horizon Cornerstone Equity Fund is expected to generate 0.97 times more return on investment than Capital World. However, Cornerstone Equity Fund is 1.03 times less risky than Capital World. It trades about -0.14 of its potential returns per unit of risk. Capital World Growth is currently generating about -0.14 per unit of risk. If you would invest 1,680 in Cornerstone Equity Fund on January 24, 2024 and sell it today you would lose (34.00) from holding Cornerstone Equity Fund or give up 2.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cornerstone Equity Fund vs. Capital World Growth
Performance |
| Timeline |
| Cornerstone Equity |
| Capital World Growth |
Cornerstone Equity and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cornerstone Equity and Capital World
The main advantage of trading using opposite Cornerstone Equity and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cornerstone Equity 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.| Cornerstone Equity vs. International Fund International | Cornerstone Equity vs. Emerging Markets Fund | Cornerstone Equity vs. Science Technology Fund | Cornerstone Equity vs. Aggressive Growth Fund |
| Capital World vs. Income Fund Of | Capital World vs. New World Fund | Capital World vs. American Mutual Fund | Capital World vs. American Mutual Fund |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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