Correlation Between Advent Claymore and Capital World

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

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

Diversification Opportunities for Advent Claymore and Capital World

0.47

Correlation Coefficient

Advent Claymore  Capital World

Very weak diversification

The 3 months correlation between Advent and Capital is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Advent Claymore Convertible and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Bond and Advent Claymore 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 Advent Claymore Convertible 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 Bond has no effect on the direction of Advent Claymore i.e., Advent Claymore and Capital World go up and down completely randomly.

Pair Corralation between Advent Claymore and Capital World

Considering the 90-day investment horizon Advent Claymore Convertible is expected to generate 2.41 times more return on investment than Capital World. However, Advent Claymore is 2.41 times more volatile than Capital World Bond. It trades about 0.08 of its potential returns per unit of risk. Capital World Bond is currently generating about 0.02 per unit of risk. If you would invest  850.00  in Advent Claymore Convertible on December 3, 2024 and sell it today you would earn a total of  345.00  from holding Advent Claymore Convertible or generate 40.59% return on investment over 90 days.

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

Advent Claymore Convertible  vs.  Capital World Bond

Advent Claymore Conv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Advent Claymore Convertible has generated negative risk-adjusted returns adding no value to fund investors. Despite quite persistent basic indicators, Advent Claymore is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Capital World Bond

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital World Bond has generated negative risk-adjusted returns adding no value to fund investors. 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.

Pair Trading with Advent Claymore and Capital World

The main advantage of trading using opposite Advent Claymore and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advent Claymore 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 Advent Claymore Convertible and Capital World Bond 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.