Correlation Between Income Growth and Chase Growth
Can any of the company-specific risk be diversified away by investing in both Income Growth and Chase 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 Income Growth and Chase Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Growth Fund and Chase Growth Fund, you can compare the effects of market volatilities on Income Growth and Chase 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 Income Growth with a short position of Chase Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Growth and Chase Growth.
Diversification Opportunities for Income Growth and Chase Growth
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and Chase is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Income Growth Fund and Chase Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chase Growth and Income 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 Income Growth Fund are associated (or correlated) with Chase Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chase Growth has no effect on the direction of Income Growth i.e., Income Growth and Chase Growth go up and down completely randomly.
Pair Corralation between Income Growth and Chase Growth
Assuming the 90 days horizon Income Growth is expected to generate 1.92 times less return on investment than Chase Growth. But when comparing it to its historical volatility, Income Growth Fund is 1.24 times less risky than Chase Growth. It trades about 0.17 of its potential returns per unit of risk. Chase Growth Fund is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,672 in Chase Growth Fund on September 2, 2024 and sell it today you would earn a total of 248.00 from holding Chase Growth Fund or generate 14.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Growth Fund vs. Chase Growth Fund
Performance |
| Timeline |
| Income Growth |
| Chase Growth |
Income Growth and Chase Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Growth and Chase Growth
The main advantage of trading using opposite Income Growth and Chase Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Growth position performs unexpectedly, Chase 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 Chase Growth will offset losses from the drop in Chase Growth's long position.| Income Growth vs. Ultra Fund I | Income Growth vs. Value Fund I | Income Growth vs. Equity Growth Fund | Income Growth vs. International Growth Fund |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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