Correlation Between Short Duration and Equity Growth
Can any of the company-specific risk be diversified away by investing in both Short Duration and Equity 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 Short Duration and Equity Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Duration Inflation and Equity Growth Fund, you can compare the effects of market volatilities on Short Duration and Equity 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 Short Duration with a short position of Equity Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Duration and Equity Growth.
Diversification Opportunities for Short Duration and Equity Growth
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Short and Equity is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Short Duration Inflation and Equity Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth and Short Duration 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 Short Duration Inflation are associated (or correlated) with Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth has no effect on the direction of Short Duration i.e., Short Duration and Equity Growth go up and down completely randomly.
Pair Corralation between Short Duration and Equity Growth
Assuming the 90 days horizon Short Duration is expected to generate 255.37 times less return on investment than Equity Growth. But when comparing it to its historical volatility, Short Duration Inflation is 206.04 times less risky than Equity Growth. It trades about 0.03 of its potential returns per unit of risk. Equity Growth Fund is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,265 in Equity Growth Fund on September 19, 2024 and sell it today you would earn a total of 1,199 from holding Equity Growth Fund or generate 52.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Short Duration Inflation vs. Equity Growth Fund
Performance |
| Timeline |
| Short Duration Inflation |
| Equity Growth |
Short Duration and Equity Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Duration and Equity Growth
The main advantage of trading using opposite Short Duration and Equity Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Duration position performs unexpectedly, Equity 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 Equity Growth will offset losses from the drop in Equity Growth's long position.| Short Duration vs. Mid Cap Value | Short Duration vs. Equity Growth Fund | Short Duration vs. Income Growth Fund | Short Duration vs. Diversified Bond Fund |
| Equity Growth vs. Qs Moderate Growth | Equity Growth vs. Strategic Allocation Moderate | Equity Growth vs. Jpmorgan Smartretirement 2035 | Equity Growth vs. Pro Blend Moderate Term |
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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