Correlation Between Cardinal Small and Capital Income

Can any of the company-specific risk be diversified away by investing in both Cardinal 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 Cardinal 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 Cardinal Small Cap and Capital Income Builder, you can compare the effects of market volatilities on Cardinal 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 Cardinal Small with a short position of Capital Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Small and Capital Income.

Diversification Opportunities for Cardinal Small and Capital Income

0.0

Correlation Coefficient

Cardinal Small  Capital Income

Pay attention - limited upside

The 3 months correlation between Cardinal and Capital is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal 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 Cardinal 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 Cardinal 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 Cardinal Small i.e., Cardinal Small and Capital Income go up and down completely randomly.

Pair Corralation between Cardinal Small and Capital Income

Assuming the 90 days horizon Cardinal Small is expected to generate 1.16 times less return on investment than Capital Income. In addition to that, Cardinal Small is 2.06 times more volatile than Capital Income Builder. It trades about 0.02 of its total potential returns per unit of risk. Capital Income Builder is currently generating about 0.06 per unit of volatility. If you would invest  6,016  in Capital Income Builder on October 11, 2024 and sell it today you would earn a total of  885.00  from holding Capital Income Builder or generate 14.71% return on investment over 90 days.

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

Cardinal Small Cap  vs.  Capital Income Builder

Cardinal Small Cap

Risk-Adjusted Performance

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Very Weak

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

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 technical and fundamental 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 Cardinal Small and Capital Income

The main advantage of trading using opposite Cardinal Small and Capital Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal 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 Cardinal 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.