Correlation Between Capital World and Summit Global

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

Diversification Opportunities for Capital World and Summit Global

0.56

Correlation Coefficient

Capital World  Summit Global

Very weak diversification

The 3 months correlation between Capital and Summit is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Summit Global Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Global Investments 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 Summit Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Global Investments has no effect on the direction of Capital World i.e., Capital World and Summit Global go up and down completely randomly.

Pair Corralation between Capital World and Summit Global

Assuming the 90 days horizon Capital World is expected to generate 3.78 times less return on investment than Summit Global. In addition to that, Capital World is 1.47 times more volatile than Summit Global Investments. It trades about 0.01 of its total potential returns per unit of risk. Summit Global Investments is currently generating about 0.08 per unit of volatility. If you would invest  3,149  in Summit Global Investments on December 22, 2024 and sell it today you would earn a total of  90.00  from holding Summit Global Investments or generate 2.86% 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.  Summit Global Investments

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 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Capital World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Summit Global Investments

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Global Investments are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Summit 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 Summit Global

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

The idea behind Capital World Growth and Summit Global Investments 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.