Correlation Between Capital Income and Strategic Advisers

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

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

Diversification Opportunities for Capital Income and Strategic Advisers

-0.11

Correlation Coefficient

Capital Income  Strategic Advisers

Good diversification

The 3 months correlation between Capital and Strategic is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Strategic Advisers Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Advisers Income and Capital Income 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 Income Builder are associated (or correlated) with Strategic Advisers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Advisers Income has no effect on the direction of Capital Income i.e., Capital Income and Strategic Advisers go up and down completely randomly.

Pair Corralation between Capital Income and Strategic Advisers

Assuming the 90 days horizon Capital Income Builder is expected to under-perform the Strategic Advisers. In addition to that, Capital Income is 2.92 times more volatile than Strategic Advisers Income. It trades about -0.06 of its total potential returns per unit of risk. Strategic Advisers Income is currently generating about 0.18 per unit of volatility. If you would invest  861.00  in Strategic Advisers Income on October 24, 2024 and sell it today you would earn a total of  21.00  from holding Strategic Advisers Income or generate 2.44% return on investment over 90 days.

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

Capital Income Builder  vs.  Strategic Advisers Income

Capital Income Builder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Income Builder has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental drivers, Capital Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Strategic Advisers Income

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Advisers Income are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Strategic Advisers 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 Income and Strategic Advisers

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

The idea behind Capital Income Builder and Strategic Advisers Income 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.