Correlation Between Equity Growth and Select Fund
Can any of the company-specific risk be diversified away by investing in both Equity Growth and Select Fund 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 Select Fund 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 Select Fund Investor, you can compare the effects of market volatilities on Equity Growth and Select Fund 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 Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Select Fund.
Diversification Opportunities for Equity Growth and Select Fund
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Equity and Select is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and Select Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund Investor 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 Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund Investor has no effect on the direction of Equity Growth i.e., Equity Growth and Select Fund go up and down completely randomly.
Pair Corralation between Equity Growth and Select Fund
Assuming the 90 days horizon Equity Growth Fund is expected to generate 0.77 times more return on investment than Select Fund. However, Equity Growth Fund is 1.29 times less risky than Select Fund. It trades about 0.19 of its potential returns per unit of risk. Select Fund Investor is currently generating about 0.05 per unit of risk. If you would invest 3,320 in Equity Growth Fund on August 30, 2024 and sell it today you would earn a total of 116.00 from holding Equity Growth Fund or generate 3.49% 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. Select Fund Investor
Performance |
| Timeline |
| Equity Growth |
| Select Fund Investor |
Equity Growth and Select Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Select Fund
The main advantage of trading using opposite Equity Growth and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, Select Fund 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 Select Fund will offset losses from the drop in Select Fund's long position.| Equity Growth vs. Vanguard Total Stock | Equity Growth vs. Vanguard 500 Index | Equity Growth vs. Vanguard Total Stock | Equity Growth vs. Vanguard Total Stock |
| Select Fund vs. Growth Fund Investor | Select Fund vs. Ultra Fund Investor | Select Fund vs. Heritage Fund Investor | Select Fund vs. International Growth 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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