Correlation Between Capital World and Crafword Dividend

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

By analyzing existing cross correlation between Capital World Bond and Crafword Dividend Growth, you can compare the effects of market volatilities on Capital World and Crafword Dividend 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 Crafword Dividend. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Crafword Dividend.

Diversification Opportunities for Capital World and Crafword Dividend

-0.47

Correlation Coefficient

Capital World  Crafword Dividend

Very good diversification

The 3 months correlation between Capital and Crafword is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Bond and Crafword Dividend Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crafword Dividend 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 Bond are associated (or correlated) with Crafword Dividend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crafword Dividend Growth has no effect on the direction of Capital World i.e., Capital World and Crafword Dividend go up and down completely randomly.

Pair Corralation between Capital World and Crafword Dividend

Assuming the 90 days horizon Capital World is expected to generate 77.5 times less return on investment than Crafword Dividend. But when comparing it to its historical volatility, Capital World Bond is 2.32 times less risky than Crafword Dividend. It trades about 0.01 of its potential returns per unit of risk. Crafword Dividend Growth is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  1,356  in Crafword Dividend Growth on February 13, 2025 and sell it today you would earn a total of  85.00  from holding Crafword Dividend Growth or generate 6.27% return on investment over 90 days.

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

Capital World Bond  vs.  Crafword Dividend Growth

Capital World Bond

Risk-Adjusted Performance

OK

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

Crafword Dividend Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Crafword Dividend Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Crafword Dividend 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 Crafword Dividend

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

The idea behind Capital World Bond and Crafword Dividend 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.