Correlation Between Capital World and Simt Global

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

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

Diversification Opportunities for Capital World and Simt Global

0.52

Correlation Coefficient

Capital World  Simt Global

Very weak diversification

The 3 months correlation between Capital and Simt is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Simt Global Managed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Global Managed 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 Growth are associated (or correlated) with Simt Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Global Managed has no effect on the direction of Capital World i.e., Capital World and Simt Global go up and down completely randomly.

Pair Corralation between Capital World and Simt Global

Assuming the 90 days horizon Capital World Growth is expected to under-perform the Simt Global. In addition to that, Capital World is 1.65 times more volatile than Simt Global Managed. It trades about 0.0 of its total potential returns per unit of risk. Simt Global Managed is currently generating about 0.16 per unit of volatility. If you would invest  1,010  in Simt Global Managed on December 29, 2024 and sell it today you would earn a total of  53.00  from holding Simt Global Managed or generate 5.25% return on investment over 90 days.

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

Capital World Growth  vs.  Simt Global Managed

Capital World Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital World Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong 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.

Simt Global Managed

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Global Managed are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Simt Global 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 Simt Global

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

The idea behind Capital World Growth and Simt Global Managed 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .