Correlation Between Income Growth and Focused International
Can any of the company-specific risk be diversified away by investing in both Income Growth and Focused International 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 Focused International 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 Focused International Growth, you can compare the effects of market volatilities on Income Growth and Focused International 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 Focused International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Growth and Focused International.
Diversification Opportunities for Income Growth and Focused International
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Income and Focused is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Income Growth Fund and Focused International Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focused International 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 Focused International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focused International has no effect on the direction of Income Growth i.e., Income Growth and Focused International go up and down completely randomly.
Pair Corralation between Income Growth and Focused International
Assuming the 90 days horizon Income Growth Fund is expected to generate 0.85 times more return on investment than Focused International. However, Income Growth Fund is 1.18 times less risky than Focused International. It trades about 0.08 of its potential returns per unit of risk. Focused International Growth is currently generating about 0.04 per unit of risk. If you would invest 2,996 in Income Growth Fund on September 5, 2024 and sell it today you would earn a total of 932.00 from holding Income Growth Fund or generate 31.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Growth Fund vs. Focused International Growth
Performance |
| Timeline |
| Income Growth |
| Focused International |
Income Growth and Focused International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Growth and Focused International
The main advantage of trading using opposite Income Growth and Focused International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Growth position performs unexpectedly, Focused International 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 Focused International will offset losses from the drop in Focused International's long position.| Income Growth vs. Mid Cap Value | Income Growth vs. Equity Growth Fund | Income Growth vs. Income Growth Fund | Income Growth vs. Diversified Bond Fund |
| Focused International vs. Value Fund Investor | Focused International vs. Ultra Fund Investor | Focused International vs. Growth Fund Investor | Focused International vs. Income 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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