Correlation Between Income Growth and Strategic Allocation
Can any of the company-specific risk be diversified away by investing in both Income Growth and Strategic Allocation 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 Strategic Allocation 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 Strategic Allocation Moderate, you can compare the effects of market volatilities on Income Growth and Strategic Allocation 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 Strategic Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Growth and Strategic Allocation.
Diversification Opportunities for Income Growth and Strategic Allocation
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and Strategic is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Income Growth Fund and Strategic Allocation Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Allocation 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 Strategic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Allocation has no effect on the direction of Income Growth i.e., Income Growth and Strategic Allocation go up and down completely randomly.
Pair Corralation between Income Growth and Strategic Allocation
Assuming the 90 days horizon Income Growth Fund is expected to generate 1.45 times more return on investment than Strategic Allocation. However, Income Growth is 1.45 times more volatile than Strategic Allocation Moderate. It trades about 0.1 of its potential returns per unit of risk. Strategic Allocation Moderate is currently generating about 0.11 per unit of risk. If you would invest 3,421 in Income Growth Fund on August 27, 2024 and sell it today you would earn a total of 491.00 from holding Income Growth Fund or generate 14.35% 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. Strategic Allocation Moderate
Performance |
| Timeline |
| Income Growth |
| Strategic Allocation |
Income Growth and Strategic Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Growth and Strategic Allocation
The main advantage of trading using opposite Income Growth and Strategic Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Growth position performs unexpectedly, Strategic Allocation 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 Strategic Allocation will offset losses from the drop in Strategic Allocation'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 |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |