Correlation Between Capital World and Aristotle/saul Global

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

Diversification Opportunities for Capital World and Aristotle/saul Global

0.84

Correlation Coefficient

Capital World  Aristotle/saul Global

Very poor diversification

The 3 months correlation between Capital and Aristotle/saul is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Aristotlesaul Global Eq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aristotle/saul Global 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 Aristotle/saul Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aristotle/saul Global has no effect on the direction of Capital World i.e., Capital World and Aristotle/saul Global go up and down completely randomly.

Pair Corralation between Capital World and Aristotle/saul Global

Assuming the 90 days horizon Capital World is expected to generate 1.8 times less return on investment than Aristotle/saul Global. In addition to that, Capital World is 1.12 times more volatile than Aristotlesaul Global Eq. It trades about 0.03 of its total potential returns per unit of risk. Aristotlesaul Global Eq is currently generating about 0.06 per unit of volatility. If you would invest  1,095  in Aristotlesaul Global Eq on December 26, 2024 and sell it today you would earn a total of  27.00  from holding Aristotlesaul Global Eq or generate 2.47% return on investment over 90 days.

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

Capital World Growth  vs.  Aristotlesaul Global Eq

Capital World Growth

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital World Growth are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Capital World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aristotle/saul Global

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aristotlesaul Global Eq are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aristotle/saul 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 Aristotle/saul Global

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

The idea behind Capital World Growth and Aristotlesaul Global Eq 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.