Correlation Between Capital World and Riskproreg

Can any of the company-specific risk be diversified away by investing in both Capital World and Riskproreg 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 Riskproreg 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 Riskproreg 30 Fund, you can compare the effects of market volatilities on Capital World and Riskproreg 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 Riskproreg. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Riskproreg.

Diversification Opportunities for Capital World and Riskproreg

0.68

Correlation Coefficient

Capital World  Riskproreg

Poor diversification

The 3 months correlation between Capital and Riskproreg is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Riskproreg 30 Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riskproreg 30 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 Riskproreg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riskproreg 30 has no effect on the direction of Capital World i.e., Capital World and Riskproreg go up and down completely randomly.

Pair Corralation between Capital World and Riskproreg

Assuming the 90 days horizon Capital World Growth is expected to under-perform the Riskproreg. In addition to that, Capital World is 1.45 times more volatile than Riskproreg 30 Fund. It trades about -0.14 of its total potential returns per unit of risk. Riskproreg 30 Fund is currently generating about -0.12 per unit of volatility. If you would invest  1,463  in Riskproreg 30 Fund on October 7, 2024 and sell it today you would lose (63.00) from holding Riskproreg 30 Fund or give up 4.31% of portfolio value over 90 days.

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

Capital World Growth  vs.  Riskproreg 30 Fund

Capital World Growth

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Riskproreg 30

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riskproreg 30 Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Riskproreg 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 Riskproreg

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

The idea behind Capital World Growth and Riskproreg 30 Fund 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.