Correlation Between Artisan Small and Capital Income

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

By analyzing existing cross correlation between Artisan Small Cap and Capital Income Builder, you can compare the effects of market volatilities on Artisan Small and Capital Income 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 Artisan Small with a short position of Capital Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Artisan Small and Capital Income.

Diversification Opportunities for Artisan Small and Capital Income

-0.28

Correlation Coefficient

Artisan Small  Capital Income

Very good diversification

The 3 months correlation between Artisan and Capital is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Artisan Small Cap and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder and Artisan Small 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 Artisan Small Cap are associated (or correlated) with Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of Artisan Small i.e., Artisan Small and Capital Income go up and down completely randomly.

Pair Corralation between Artisan Small and Capital Income

Assuming the 90 days horizon Artisan Small Cap is expected to under-perform the Capital Income. In addition to that, Artisan Small is 2.53 times more volatile than Capital Income Builder. It trades about -0.08 of its total potential returns per unit of risk. Capital Income Builder is currently generating about 0.13 per unit of volatility. If you would invest  6,904  in Capital Income Builder on December 21, 2024 and sell it today you would earn a total of  310.00  from holding Capital Income Builder or generate 4.49% return on investment over 90 days.

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

Artisan Small Cap  vs.  Capital Income Builder

Artisan Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Artisan Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Capital Income Builder

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Income Builder are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Capital Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Artisan Small and Capital Income

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

The idea behind Artisan Small Cap and Capital Income Builder 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.