Correlation Between Select Fund and Growth Fund
Can any of the company-specific risk be diversified away by investing in both Select Fund and Growth 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 Select Fund and Growth Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Fund R and Growth Fund C, you can compare the effects of market volatilities on Select Fund and Growth 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 Select Fund with a short position of Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Fund and Growth Fund.
Diversification Opportunities for Select Fund and Growth Fund
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Select and Growth is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Select Fund R and Growth Fund C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund C and Select Fund 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 Select Fund R are associated (or correlated) with Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund C has no effect on the direction of Select Fund i.e., Select Fund and Growth Fund go up and down completely randomly.
Pair Corralation between Select Fund and Growth Fund
Assuming the 90 days horizon Select Fund is expected to generate 1.21 times less return on investment than Growth Fund. In addition to that, Select Fund is 1.07 times more volatile than Growth Fund C. It trades about 0.07 of its total potential returns per unit of risk. Growth Fund C is currently generating about 0.1 per unit of volatility. If you would invest 3,187 in Growth Fund C on September 5, 2024 and sell it today you would earn a total of 1,935 from holding Growth Fund C or generate 60.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Fund R vs. Growth Fund C
Performance |
| Timeline |
| Select Fund R |
| Growth Fund C |
Select Fund and Growth Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Fund and Growth Fund
The main advantage of trading using opposite Select Fund and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Fund position performs unexpectedly, Growth 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 Growth Fund will offset losses from the drop in Growth Fund's long position.| Select Fund vs. Select Fund C | Select Fund vs. American Century Ultra | Select Fund vs. Nasdaq 100 Fund Class |
| Growth Fund vs. Select Fund R | Growth Fund vs. Select Fund C | Growth Fund vs. American Century Ultra | Growth Fund vs. Nasdaq 100 Fund Class |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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