Correlation Between Disciplined Growth and Income Growth
Can any of the company-specific risk be diversified away by investing in both Disciplined Growth and Income 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 Disciplined Growth and Income Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Disciplined Growth Fund and Income Growth Fund, you can compare the effects of market volatilities on Disciplined Growth and Income 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 Disciplined Growth with a short position of Income Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Disciplined Growth and Income Growth.
Diversification Opportunities for Disciplined Growth and Income Growth
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Disciplined and Income is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Disciplined Growth Fund and Income Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Growth and Disciplined Growth 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 Disciplined Growth Fund are associated (or correlated) with Income Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Growth has no effect on the direction of Disciplined Growth i.e., Disciplined Growth and Income Growth go up and down completely randomly.
Pair Corralation between Disciplined Growth and Income Growth
Assuming the 90 days horizon Disciplined Growth Fund is expected to generate 1.55 times more return on investment than Income Growth. However, Disciplined Growth is 1.55 times more volatile than Income Growth Fund. It trades about 0.09 of its potential returns per unit of risk. Income Growth Fund is currently generating about 0.13 per unit of risk. If you would invest 2,761 in Disciplined Growth Fund on August 26, 2024 and sell it today you would earn a total of 364.00 from holding Disciplined Growth Fund or generate 13.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Disciplined Growth Fund vs. Income Growth Fund
Performance |
| Timeline |
| Disciplined Growth |
| Income Growth |
Disciplined Growth and Income Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Disciplined Growth and Income Growth
The main advantage of trading using opposite Disciplined Growth and Income Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Disciplined Growth position performs unexpectedly, Income 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 Income Growth will offset losses from the drop in Income Growth's long position.| Disciplined Growth vs. Focused Dynamic Growth | Disciplined Growth vs. Sustainable Equity Fund | Disciplined Growth vs. Small Cap Growth | Disciplined Growth vs. Emerging Markets Fund |
| Income Growth vs. Ultra Fund I | Income Growth vs. Value Fund I | Income Growth vs. Equity Growth Fund | Income Growth vs. International Growth Fund |
Check out your portfolio center.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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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