Correlation Between Capital Income and Global Strategist
Can any of the company-specific risk be diversified away by investing in both Capital Income and Global Strategist 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 Income and Global Strategist into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Income Builder and Global Strategist Portfolio, you can compare the effects of market volatilities on Capital Income and Global Strategist 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 Income with a short position of Global Strategist. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Global Strategist.
Diversification Opportunities for Capital Income and Global Strategist
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Capital and Global is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Global Strategist Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Strategist and Capital Income 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 Income Builder are associated (or correlated) with Global Strategist. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Strategist has no effect on the direction of Capital Income i.e., Capital Income and Global Strategist go up and down completely randomly.
Pair Corralation between Capital Income and Global Strategist
Assuming the 90 days horizon Capital Income Builder is expected to generate 1.06 times more return on investment than Global Strategist. However, Capital Income is 1.06 times more volatile than Global Strategist Portfolio. It trades about 0.09 of its potential returns per unit of risk. Global Strategist Portfolio is currently generating about 0.08 per unit of risk. If you would invest 5,916 in Capital Income Builder on March 29, 2025 and sell it today you would earn a total of 1,629 from holding Capital Income Builder or generate 27.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Income Builder vs. Global Strategist Portfolio
Performance |
| Timeline |
| Capital Income Builder |
| Global Strategist |
Capital Income and Global Strategist Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Global Strategist
The main advantage of trading using opposite Capital Income and Global Strategist positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Global Strategist 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 Global Strategist will offset losses from the drop in Global Strategist's long position.| Capital Income vs. Tiaa Cref Lifestyle Moderate | Capital Income vs. Cornerstone Moderately Aggressive | Capital Income vs. Jpmorgan Smartretirement 2035 | Capital Income vs. College Retirement Equities |
| Global Strategist vs. Fidelity Capital Income | Global Strategist vs. Strategic Advisers Income | Global Strategist vs. Jpmorgan High Yield | Global Strategist vs. Federated High Yield |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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