Correlation Between The Bond and The Growth
Can any of the company-specific risk be diversified away by investing in both The Bond and The 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 The Bond and The Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Bond Fund and The Growth Fund, you can compare the effects of market volatilities on The Bond and The 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 The Bond with a short position of The Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Bond and The Growth.
Diversification Opportunities for The Bond and The Growth
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between The and The is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding The Bond Fund and The Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund and The Bond 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 The Bond Fund are associated (or correlated) with The Growth. 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 has no effect on the direction of The Bond i.e., The Bond and The Growth go up and down completely randomly.
Pair Corralation between The Bond and The Growth
Assuming the 90 days horizon The Bond is expected to generate 7.1 times less return on investment than The Growth. But when comparing it to its historical volatility, The Bond Fund is 2.29 times less risky than The Growth. It trades about 0.11 of its potential returns per unit of risk. The Growth Fund is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 5,275 in The Growth Fund on September 1, 2024 and sell it today you would earn a total of 364.00 from holding The Growth Fund or generate 6.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
The Bond Fund vs. The Growth Fund
Performance |
| Timeline |
| Bond Fund |
| Growth Fund |
The Bond and The Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with The Bond and The Growth
The main advantage of trading using opposite The Bond and The Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Bond position performs unexpectedly, The 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 The Growth will offset losses from the drop in The Growth's long position.| The Bond vs. Blackrock Health Sciences | The Bond vs. Tekla Healthcare Opportunities | The Bond vs. Lord Abbett Health | The Bond vs. Fidelity Advisor Health |
| The Growth vs. Alliancebernstein National Municipal | The Growth vs. Ishares Municipal Bond | The Growth vs. T Rowe Price | The Growth vs. Federated Ohio Municipal |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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