Correlation Between Capital World and Black Oak

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

By analyzing existing cross correlation between Capital World Bond and Black Oak Emerging, you can compare the effects of market volatilities on Capital World and Black Oak 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 Black Oak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and Black Oak.

Diversification Opportunities for Capital World and Black Oak

-0.67

Correlation Coefficient

Capital World  Black Oak

Excellent diversification

The 3 months correlation between Capital and Black is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Bond and Black Oak Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Oak Emerging 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 Bond are associated (or correlated) with Black Oak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Oak Emerging has no effect on the direction of Capital World i.e., Capital World and Black Oak go up and down completely randomly.

Pair Corralation between Capital World and Black Oak

Assuming the 90 days horizon Capital World Bond is expected to under-perform the Black Oak. But the mutual fund apears to be less risky and, when comparing its historical volatility, Capital World Bond is 3.48 times less risky than Black Oak. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Black Oak Emerging is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  761.00  in Black Oak Emerging on September 4, 2024 and sell it today you would earn a total of  67.00  from holding Black Oak Emerging or generate 8.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Capital World Bond  vs.  Black Oak Emerging

Capital World Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital World Bond 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.

Black Oak Emerging

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Black Oak Emerging are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Black Oak may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capital World and Black Oak

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

The idea behind Capital World Bond and Black Oak Emerging 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.