Correlation Between Income Fund and Growth Strategy
Can any of the company-specific risk be diversified away by investing in both Income Fund and Growth Strategy 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 Income Fund and Growth Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Fund Of and Growth Strategy Fund, you can compare the effects of market volatilities on Income Fund and Growth Strategy 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 Income Fund with a short position of Growth Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and Growth Strategy.
Diversification Opportunities for Income Fund and Growth Strategy
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and GROWTH is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Of and Growth Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Strategy and Income 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 Income Fund Of are associated (or correlated) with Growth Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Strategy has no effect on the direction of Income Fund i.e., Income Fund and Growth Strategy go up and down completely randomly.
Pair Corralation between Income Fund and Growth Strategy
Assuming the 90 days horizon Income Fund is expected to generate 1.41 times less return on investment than Growth Strategy. But when comparing it to its historical volatility, Income Fund Of is 1.34 times less risky than Growth Strategy. It trades about 0.15 of its potential returns per unit of risk. Growth Strategy Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,313 in Growth Strategy Fund on August 31, 2024 and sell it today you would earn a total of 25.00 from holding Growth Strategy Fund or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Fund Of vs. Growth Strategy Fund
Performance |
| Timeline |
| Income Fund |
| Growth Strategy |
Income Fund and Growth Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Fund and Growth Strategy
The main advantage of trading using opposite Income Fund and Growth Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund position performs unexpectedly, Growth Strategy 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 Growth Strategy will offset losses from the drop in Growth Strategy's long position.| Income Fund vs. Capital Income Builder | Income Fund vs. Capital World Growth | Income Fund vs. American Balanced | Income Fund vs. American Funds Fundamental |
| Growth Strategy vs. American Funds The | Growth Strategy vs. Income Fund Of | Growth Strategy vs. Income Fund Of | Growth Strategy vs. Income Fund Of |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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