Correlation Between Equity Growth and Sustainable Equity
Can any of the company-specific risk be diversified away by investing in both Equity Growth and Sustainable Equity 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 Equity Growth and Sustainable Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Fund and Sustainable Equity Fund, you can compare the effects of market volatilities on Equity Growth and Sustainable Equity 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 Equity Growth with a short position of Sustainable Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Sustainable Equity.
Diversification Opportunities for Equity Growth and Sustainable Equity
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Equity and Sustainable is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and Sustainable Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sustainable Equity and Equity Growth 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 Equity Growth Fund are associated (or correlated) with Sustainable Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sustainable Equity has no effect on the direction of Equity Growth i.e., Equity Growth and Sustainable Equity go up and down completely randomly.
Pair Corralation between Equity Growth and Sustainable Equity
Assuming the 90 days horizon Equity Growth Fund is expected to generate 56.75 times more return on investment than Sustainable Equity. However, Equity Growth is 56.75 times more volatile than Sustainable Equity Fund. It trades about 0.04 of its potential returns per unit of risk. Sustainable Equity Fund is currently generating about 0.11 per unit of risk. If you would invest 2,245 in Equity Growth Fund on September 3, 2024 and sell it today you would earn a total of 1,210 from holding Equity Growth Fund or generate 53.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Growth Fund vs. Sustainable Equity Fund
Performance |
| Timeline |
| Equity Growth |
| Sustainable Equity |
Equity Growth and Sustainable Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Sustainable Equity
The main advantage of trading using opposite Equity Growth and Sustainable Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, Sustainable Equity 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 Sustainable Equity will offset losses from the drop in Sustainable Equity's long position.| Equity Growth vs. Blrc Sgy Mnp | Equity Growth vs. Maryland Tax Free Bond | Equity Growth vs. Ambrus Core Bond | Equity Growth vs. Ab Bond Inflation |
| Sustainable Equity vs. Vanguard Total Stock | Sustainable Equity vs. Vanguard 500 Index | Sustainable Equity vs. Vanguard Total Stock | Sustainable Equity vs. Vanguard Total Stock |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum |