Correlation Between Growth Fund and Plumb Equity
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Plumb Equity 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 Growth Fund and Plumb Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Of and Plumb Equity, you can compare the effects of market volatilities on Growth Fund and Plumb Equity 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 Growth Fund with a short position of Plumb Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Plumb Equity.
Diversification Opportunities for Growth Fund and Plumb Equity
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Plumb is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and Plumb Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumb Equity and Growth 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 Growth Fund Of are associated (or correlated) with Plumb Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumb Equity has no effect on the direction of Growth Fund i.e., Growth Fund and Plumb Equity go up and down completely randomly.
Pair Corralation between Growth Fund and Plumb Equity
Assuming the 90 days horizon Growth Fund is expected to generate 1.12 times less return on investment than Plumb Equity. But when comparing it to its historical volatility, Growth Fund Of is 1.07 times less risky than Plumb Equity. It trades about 0.17 of its potential returns per unit of risk. Plumb Equity is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,077 in Plumb Equity on August 31, 2024 and sell it today you would earn a total of 124.00 from holding Plumb Equity or generate 4.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Of vs. Plumb Equity
Performance |
| Timeline |
| Growth Fund |
| Plumb Equity |
Growth Fund and Plumb Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Plumb Equity
The main advantage of trading using opposite Growth Fund and Plumb Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Plumb Equity 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 Plumb Equity will offset losses from the drop in Plumb Equity's long position.| Growth Fund vs. Europacific Growth Fund | Growth Fund vs. Washington Mutual Investors | Growth Fund vs. Capital World Growth | Growth Fund vs. HUMANA INC |
| Plumb Equity vs. T Rowe Price | Plumb Equity vs. Qs Growth Fund | Plumb Equity vs. L Abbett Growth | Plumb Equity vs. Small Midcap Dividend Income |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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