Correlation Between Growth Fund and American Growth
Can any of the company-specific risk be diversified away by investing in both Growth Fund and American 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 Growth Fund and American Growth 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 American Growth Fund, you can compare the effects of market volatilities on Growth Fund and American 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 Growth Fund with a short position of American Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and American Growth.
Diversification Opportunities for Growth Fund and American Growth
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Growth and American is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and American Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Growth 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 American Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Growth has no effect on the direction of Growth Fund i.e., Growth Fund and American Growth go up and down completely randomly.
Pair Corralation between Growth Fund and American Growth
Assuming the 90 days horizon Growth Fund is expected to generate 1.61 times less return on investment than American Growth. But when comparing it to its historical volatility, Growth Fund Of is 1.16 times less risky than American Growth. It trades about 0.37 of its potential returns per unit of risk. American Growth Fund is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 570.00 in American Growth Fund on September 1, 2024 and sell it today you would earn a total of 66.00 from holding American Growth Fund or generate 11.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Growth Fund Of vs. American Growth Fund
Performance |
| Timeline |
| Growth Fund |
| American Growth |
Growth Fund and American Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and American Growth
The main advantage of trading using opposite Growth Fund and American Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, American 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 American Growth will offset losses from the drop in American Growth'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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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