Correlation Between Capital Income and Ampleforth

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

Diversification Opportunities for Capital Income and Ampleforth

-0.32

Correlation Coefficient

Capital Income  Ampleforth

Very good diversification

The 3 months correlation between Capital and Ampleforth is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Ampleforth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampleforth 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 Ampleforth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampleforth has no effect on the direction of Capital Income i.e., Capital Income and Ampleforth go up and down completely randomly.

Pair Corralation between Capital Income and Ampleforth

Assuming the 90 days horizon Capital Income is expected to generate 3.37 times less return on investment than Ampleforth. But when comparing it to its historical volatility, Capital Income Builder is 11.44 times less risky than Ampleforth. It trades about 0.05 of its potential returns per unit of risk. Ampleforth is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  144.00  in Ampleforth on March 28, 2024 and sell it today you would lose (50.00) from holding Ampleforth or give up 34.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	58.23%
Values	Daily Returns

Capital Income Builder  vs.  Ampleforth

Capital Income Builder

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Income Builder are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Capital Income is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ampleforth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ampleforth has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in July 2024. The latest tumult may also be a sign of longer-term up-swing for Ampleforth shareholders.

Pair Trading with Capital Income and Ampleforth

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

The idea behind Capital Income Builder and Ampleforth 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.