Correlation Between Growth Fund and First Trust
Can any of the company-specific risk be diversified away by investing in both Growth Fund and First Trust 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 First Trust 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 First Trust California, you can compare the effects of market volatilities on Growth Fund and First Trust 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and First Trust.
Diversification Opportunities for Growth Fund and First Trust
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Growth and First is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and First Trust California in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust California 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust California has no effect on the direction of Growth Fund i.e., Growth Fund and First Trust go up and down completely randomly.
Pair Corralation between Growth Fund and First Trust
Assuming the 90 days horizon Growth Fund Of is expected to generate 3.67 times more return on investment than First Trust. However, Growth Fund is 3.67 times more volatile than First Trust California. It trades about 0.24 of its potential returns per unit of risk. First Trust California is currently generating about 0.02 per unit of risk. If you would invest 7,457 in Growth Fund Of on November 3, 2024 and sell it today you would earn a total of 374.00 from holding Growth Fund Of or generate 5.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Of vs. First Trust California
Performance |
| Timeline |
| Growth Fund |
| First Trust California |
Growth Fund and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and First Trust
The main advantage of trading using opposite Growth Fund and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust'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 |
| First Trust vs. First Trust Municipal | First Trust vs. First Trust Emerging | First Trust vs. First Trust Income | First Trust vs. First Trust Managed |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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