Correlation Between Glg Intl and Capital Income

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

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

Diversification Opportunities for Glg Intl and Capital Income

0.01

Correlation Coefficient

Glg Intl  Capital Income

Significant diversification

The 3 months correlation between Glg and Capital is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Glg Intl Small 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 Glg Intl 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 Glg Intl Small 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 Glg Intl i.e., Glg Intl and Capital Income go up and down completely randomly.

Pair Corralation between Glg Intl and Capital Income

Assuming the 90 days horizon Glg Intl Small is expected to generate 2.35 times more return on investment than Capital Income. However, Glg Intl is 2.35 times more volatile than Capital Income Builder. It trades about 0.16 of its potential returns per unit of risk. Capital Income Builder is currently generating about -0.01 per unit of risk. If you would invest  7,993  in Glg Intl Small on September 15, 2024 and sell it today you would earn a total of  754.00  from holding Glg Intl Small or generate 9.43% return on investment over 90 days.

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

Glg Intl Small  vs.  Capital Income Builder

Glg Intl Small

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Glg Intl Small are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Glg Intl may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 technical and fundamental 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 Glg Intl and Capital Income

The main advantage of trading using opposite Glg Intl and Capital Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glg Intl 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 Glg Intl Small 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.