Correlation Between Equity Growth and Intermediate-term
Can any of the company-specific risk be diversified away by investing in both Equity Growth and Intermediate-term 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 Intermediate-term 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 Intermediate Term Tax Free Bond, you can compare the effects of market volatilities on Equity Growth and Intermediate-term 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 Intermediate-term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Intermediate-term.
Diversification Opportunities for Equity Growth and Intermediate-term
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Equity and Intermediate-term is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and Intermediate Term Tax Free Bon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Term Tax 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 Intermediate-term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Term Tax has no effect on the direction of Equity Growth i.e., Equity Growth and Intermediate-term go up and down completely randomly.
Pair Corralation between Equity Growth and Intermediate-term
Assuming the 90 days horizon Equity Growth Fund is expected to generate 232.84 times more return on investment than Intermediate-term. However, Equity Growth is 232.84 times more volatile than Intermediate Term Tax Free Bond. It trades about 0.04 of its potential returns per unit of risk. Intermediate Term Tax Free Bond is currently generating about 0.07 per unit of risk. If you would invest 2,219 in Equity Growth Fund on August 30, 2024 and sell it today you would earn a total of 1,217 from holding Equity Growth Fund or generate 54.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Growth Fund vs. Intermediate Term Tax Free Bon
Performance |
| Timeline |
| Equity Growth |
| Intermediate Term Tax |
Equity Growth and Intermediate-term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Intermediate-term
The main advantage of trading using opposite Equity Growth and Intermediate-term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, Intermediate-term 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 Intermediate-term will offset losses from the drop in Intermediate-term'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 |
| Intermediate-term vs. Federated Government Ultrashort | Intermediate-term vs. Gamco Global Telecommunications | Intermediate-term vs. T Rowe Price | Intermediate-term vs. Nuveen Massachusetts Municipal |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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