Correlation Between Gold Portfolio and Capital World

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

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

Diversification Opportunities for Gold Portfolio and Capital World

0.32

Correlation Coefficient

Gold Portfolio  Capital World

Weak diversification

The 3 months correlation between Gold and Capital is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Gold Portfolio Fidelity 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 Gold Portfolio 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 Gold Portfolio Fidelity 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 Gold Portfolio i.e., Gold Portfolio and Capital World go up and down completely randomly.

Pair Corralation between Gold Portfolio and Capital World

Assuming the 90 days horizon Gold Portfolio Fidelity is expected to generate 1.81 times more return on investment than Capital World. However, Gold Portfolio is 1.81 times more volatile than Capital World Growth. It trades about 0.31 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.0 per unit of risk. If you would invest  2,358  in Gold Portfolio Fidelity on December 29, 2024 and sell it today you would earn a total of  800.00  from holding Gold Portfolio Fidelity or generate 33.93% return on investment over 90 days.

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

Gold Portfolio Fidelity  vs.  Capital World Growth

Gold Portfolio Fidelity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Gold Portfolio Fidelity are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Gold Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Capital World Growth

Risk-Adjusted Performance

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 fundamental drivers, 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 Gold Portfolio and Capital World

The main advantage of trading using opposite Gold Portfolio and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Portfolio 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 Gold Portfolio Fidelity 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.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.