Correlation Between Growth Fund and INTER CARS
Can any of the company-specific risk be diversified away by investing in both Growth Fund and INTER CARS 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 Growth Fund and INTER CARS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Of and INTER CARS SA, you can compare the effects of market volatilities on Growth Fund and INTER CARS 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 Growth Fund with a short position of INTER CARS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and INTER CARS.
Diversification Opportunities for Growth Fund and INTER CARS
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Growth and INTER is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and INTER CARS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INTER CARS SA and Growth Fund 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 Growth Fund Of are associated (or correlated) with INTER CARS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INTER CARS SA has no effect on the direction of Growth Fund i.e., Growth Fund and INTER CARS go up and down completely randomly.
Pair Corralation between Growth Fund and INTER CARS
Assuming the 90 days horizon Growth Fund is expected to generate 11.32 times less return on investment than INTER CARS. But when comparing it to its historical volatility, Growth Fund Of is 1.9 times less risky than INTER CARS. It trades about 0.08 of its potential returns per unit of risk. INTER CARS SA is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest 11,680 in INTER CARS SA on October 22, 2024 and sell it today you would earn a total of 1,780 from holding INTER CARS SA or generate 15.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 88.89% |
| Values | Daily Returns |
Growth Fund Of vs. INTER CARS SA
Performance |
| Timeline |
| Growth Fund |
| INTER CARS SA |
Growth Fund and INTER CARS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and INTER CARS
The main advantage of trading using opposite Growth Fund and INTER CARS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, INTER CARS 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 INTER CARS will offset losses from the drop in INTER CARS's long position.| Growth Fund vs. Capital World Growth | Growth Fund vs. Europacific Growth Fund | Growth Fund vs. New Perspective Fund | Growth Fund vs. Investment Of America |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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