Correlation Between Capital World and Chase Growth

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

Diversification Opportunities for Capital World and Chase Growth

0.68

Correlation Coefficient

Capital World  Chase Growth

Poor diversification

The 3 months correlation between Capital and Chase is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth and Chase Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chase Growth 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 Chase Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chase Growth has no effect on the direction of Capital World i.e., Capital World and Chase Growth go up and down completely randomly.

Pair Corralation between Capital World and Chase Growth

Assuming the 90 days horizon Capital World is expected to generate 3.58 times less return on investment than Chase Growth. But when comparing it to its historical volatility, Capital World Growth is 1.29 times less risky than Chase Growth. It trades about 0.09 of its potential returns per unit of risk. Chase Growth Fund is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,541  in Chase Growth Fund on August 31, 2024 and sell it today you would earn a total of  221.00  from holding Chase Growth Fund or generate 14.34% return on investment over 90 days.

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

Capital World Growth  vs.  Chase Growth Fund

Capital World Growth

Risk-Adjusted Performance

7 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital World Growth are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. 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.

Chase Growth

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chase Growth Fund are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Chase Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capital World and Chase Growth

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

The idea behind Capital World Growth and Chase Growth Fund 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.