Correlation Between Capital World and Victory Rs

Can any of the company-specific risk be diversified away by investing in both Capital World and Victory Rs 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 Victory Rs 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 Victory Rs Select, you can compare the effects of market volatilities on Capital World and Victory Rs 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 Victory Rs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Victory Rs.

Diversification Opportunities for Capital World and Victory Rs

0.01

Correlation Coefficient

Capital World  Victory Rs

Significant diversification

The 3 months correlation between Capital and Victory is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Victory Rs Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Victory Rs Select 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 Victory Rs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Victory Rs Select has no effect on the direction of Capital World i.e., Capital World and Victory Rs go up and down completely randomly.

Pair Corralation between Capital World and Victory Rs

Assuming the 90 days horizon Capital World is expected to generate 1.51 times less return on investment than Victory Rs. But when comparing it to its historical volatility, Capital World Growth is 1.48 times less risky than Victory Rs. It trades about 0.06 of its potential returns per unit of risk. Victory Rs Select is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,689  in Victory Rs Select on September 27, 2024 and sell it today you would earn a total of  621.00  from holding Victory Rs Select or generate 36.77% return on investment over 90 days.

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

Capital World Growth  vs.  Victory Rs Select

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.

Victory Rs Select

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Victory Rs Select are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Victory Rs may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capital World and Victory Rs

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

The idea behind Capital World Growth and Victory Rs Select 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.