Correlation Between Fulcrum Diversified and Capital World

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

By analyzing existing cross correlation between Fulcrum Diversified Absolute and Capital World Growth, you can compare the effects of market volatilities on Fulcrum Diversified and Capital World 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 Fulcrum Diversified with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fulcrum Diversified and Capital World.

Diversification Opportunities for Fulcrum Diversified and Capital World

0.63

Correlation Coefficient

Fulcrum Diversified  Capital World

Poor diversification

The 3 months correlation between Fulcrum and Capital is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Fulcrum Diversified Absolute and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Fulcrum Diversified 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 Fulcrum Diversified Absolute are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Fulcrum Diversified i.e., Fulcrum Diversified and Capital World go up and down completely randomly.

Pair Corralation between Fulcrum Diversified and Capital World

Assuming the 90 days horizon Fulcrum Diversified Absolute is expected to generate 0.36 times more return on investment than Capital World. However, Fulcrum Diversified Absolute is 2.77 times less risky than Capital World. It trades about 0.0 of its potential returns per unit of risk. Capital World Growth is currently generating about -0.03 per unit of risk. If you would invest  946.00  in Fulcrum Diversified Absolute on October 25, 2024 and sell it today you would earn a total of  0.00  from holding Fulcrum Diversified Absolute or generate 0.0% return on investment over 90 days.

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

Fulcrum Diversified Absolute  vs.  Capital World Growth

Fulcrum Diversified

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fulcrum Diversified Absolute has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Fulcrum Diversified is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 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.

Pair Trading with Fulcrum Diversified and Capital World

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

The idea behind Fulcrum Diversified Absolute and Capital World Growth 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.