Correlation Between Sustainable Equity and Disciplined Growth
Can any of the company-specific risk be diversified away by investing in both Sustainable Equity and Disciplined 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 Sustainable Equity and Disciplined Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sustainable Equity Fund and Disciplined Growth Fund, you can compare the effects of market volatilities on Sustainable Equity and Disciplined 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 Sustainable Equity with a short position of Disciplined Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sustainable Equity and Disciplined Growth.
Diversification Opportunities for Sustainable Equity and Disciplined Growth
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sustainable and Disciplined is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Sustainable Equity Fund and Disciplined Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Disciplined Growth and Sustainable Equity 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 Sustainable Equity Fund are associated (or correlated) with Disciplined Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Disciplined Growth has no effect on the direction of Sustainable Equity i.e., Sustainable Equity and Disciplined Growth go up and down completely randomly.
Pair Corralation between Sustainable Equity and Disciplined Growth
Assuming the 90 days horizon Sustainable Equity is expected to generate 1.51 times less return on investment than Disciplined Growth. But when comparing it to its historical volatility, Sustainable Equity Fund is 1.28 times less risky than Disciplined Growth. It trades about 0.1 of its potential returns per unit of risk. Disciplined Growth Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,761 in Disciplined Growth Fund on August 30, 2024 and sell it today you would earn a total of 1,369 from holding Disciplined Growth Fund or generate 77.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sustainable Equity Fund vs. Disciplined Growth Fund
Performance |
| Timeline |
| Sustainable Equity |
| Disciplined Growth |
Sustainable Equity and Disciplined Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sustainable Equity and Disciplined Growth
The main advantage of trading using opposite Sustainable Equity and Disciplined Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sustainable Equity position performs unexpectedly, Disciplined 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 Disciplined Growth will offset losses from the drop in Disciplined Growth's long position.| Sustainable Equity vs. Disciplined Growth Fund | Sustainable Equity vs. Focused Dynamic Growth | Sustainable Equity vs. Small Cap Growth | Sustainable Equity vs. Mid Cap Value |
| Disciplined Growth vs. Growth Fund Of | Disciplined Growth vs. HUMANA INC | Disciplined Growth vs. Aquagold International | Disciplined Growth vs. Barloworld Ltd ADR |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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