Correlation Between Equity Growth and Income Growth
Can any of the company-specific risk be diversified away by investing in both Equity Growth and Income 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 Equity Growth and Income Growth 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 Income Growth Fund, you can compare the effects of market volatilities on Equity Growth and Income 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 Equity Growth with a short position of Income Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Income Growth.
Diversification Opportunities for Equity Growth and Income Growth
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Equity and Income is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and Income Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Growth 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 Income Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Growth has no effect on the direction of Equity Growth i.e., Equity Growth and Income Growth go up and down completely randomly.
Pair Corralation between Equity Growth and Income Growth
Assuming the 90 days horizon Equity Growth Fund is expected to generate 1.04 times more return on investment than Income Growth. However, Equity Growth is 1.04 times more volatile than Income Growth Fund. It trades about 0.14 of its potential returns per unit of risk. Income Growth Fund is currently generating about -0.07 per unit of risk. If you would invest 3,435 in Equity Growth Fund on September 13, 2024 and sell it today you would earn a total of 64.00 from holding Equity Growth Fund or generate 1.86% 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. Income Growth Fund
Performance |
| Timeline |
| Equity Growth |
| Income Growth |
Equity Growth and Income Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Income Growth
The main advantage of trading using opposite Equity Growth and Income Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, Income 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 Income Growth will offset losses from the drop in Income Growth's long position.| Equity Growth vs. Strategic Allocation Moderate | Equity Growth vs. Deutsche Multi Asset Moderate | Equity Growth vs. Saat Moderate Strategy | Equity Growth vs. Sa Worldwide Moderate |
| Income Growth vs. Mid Cap Value | Income Growth vs. Equity Growth Fund | Income Growth vs. Income Growth Fund | Income Growth vs. Diversified Bond Fund |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |