Correlation Between Capital World and Ab Small

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Capital World and Ab Small 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 Ab Small 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 Ab Small Cap, you can compare the effects of market volatilities on Capital World and Ab Small 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 Ab Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Ab Small.

Diversification Opportunities for Capital World and Ab Small

0.51
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Capital and SCYVX is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Ab Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Small Cap 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 Ab Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Small Cap has no effect on the direction of Capital World i.e., Capital World and Ab Small go up and down completely randomly.

Pair Corralation between Capital World and Ab Small

Assuming the 90 days horizon Capital World is expected to generate 1.99 times less return on investment than Ab Small. But when comparing it to its historical volatility, Capital World Growth is 1.93 times less risky than Ab Small. It trades about 0.14 of its potential returns per unit of risk. Ab Small Cap is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,471  in Ab Small Cap on September 5, 2024 and sell it today you would earn a total of  178.00  from holding Ab Small Cap or generate 12.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Capital World Growth  vs.  Ab Small Cap

 Performance 
       Timeline  
Capital World Growth 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Capital World Growth are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and 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.
Ab Small Cap 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ab Small Cap are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ab Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Capital World and Ab Small Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Capital World and Ab Small

The main advantage of trading using opposite Capital World and Ab Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, Ab Small 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 Ab Small will offset losses from the drop in Ab Small's long position.
The idea behind Capital World Growth and Ab Small Cap 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

Other Complementary Tools

Headlines Timeline
Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity
Sectors
List of equity sectors categorizing publicly traded companies based on their primary business activities
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Bollinger Bands
Use Bollinger Bands indicator to analyze target price for a given investing horizon
Sign In To Macroaxis
Sign in to explore Macroaxis' wealth optimization platform and fintech modules