Correlation Between Sa Worldwide and Capital Income

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

By analyzing existing cross correlation between Sa Worldwide Moderate and Capital Income Builder, you can compare the effects of market volatilities on Sa Worldwide and Capital Income 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 Sa Worldwide with a short position of Capital Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sa Worldwide and Capital Income.

Diversification Opportunities for Sa Worldwide and Capital Income

0.79

Correlation Coefficient

Sa Worldwide  Capital Income

Poor diversification

The 3 months correlation between SAWMX and Capital is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sa Worldwide Moderate and Capital Income Builder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Income Builder and Sa Worldwide 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 Sa Worldwide Moderate are associated (or correlated) with Capital Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Income Builder has no effect on the direction of Sa Worldwide i.e., Sa Worldwide and Capital Income go up and down completely randomly.

Pair Corralation between Sa Worldwide and Capital Income

Assuming the 90 days horizon Sa Worldwide is expected to generate 1.46 times less return on investment than Capital Income. In addition to that, Sa Worldwide is 1.12 times more volatile than Capital Income Builder. It trades about 0.03 of its total potential returns per unit of risk. Capital Income Builder is currently generating about 0.05 per unit of volatility. If you would invest  6,512  in Capital Income Builder on October 7, 2024 and sell it today you would earn a total of  426.00  from holding Capital Income Builder or generate 6.54% return on investment over 90 days.

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

Sa Worldwide Moderate  vs.  Capital Income Builder

Sa Worldwide Moderate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sa Worldwide Moderate has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Capital Income Builder

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sa Worldwide and Capital Income

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

The idea behind Sa Worldwide Moderate and Capital Income Builder 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.