Correlation Between Enhanced Large and American Growth
Can any of the company-specific risk be diversified away by investing in both Enhanced Large and American 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 Enhanced Large and American Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enhanced Large Pany and American Growth Fund, you can compare the effects of market volatilities on Enhanced Large and American 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 Enhanced Large with a short position of American Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enhanced Large and American Growth.
Diversification Opportunities for Enhanced Large and American Growth
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Enhanced and American is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Enhanced Large Pany and American Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Growth and Enhanced Large 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 Enhanced Large Pany are associated (or correlated) with American Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Growth has no effect on the direction of Enhanced Large i.e., Enhanced Large and American Growth go up and down completely randomly.
Pair Corralation between Enhanced Large and American Growth
Assuming the 90 days horizon Enhanced Large Pany is expected to generate 0.66 times more return on investment than American Growth. However, Enhanced Large Pany is 1.51 times less risky than American Growth. It trades about 0.14 of its potential returns per unit of risk. American Growth Fund is currently generating about 0.04 per unit of risk. If you would invest 1,213 in Enhanced Large Pany on September 12, 2024 and sell it today you would earn a total of 364.00 from holding Enhanced Large Pany or generate 30.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enhanced Large Pany vs. American Growth Fund
Performance |
| Timeline |
| Enhanced Large Pany |
| American Growth |
Enhanced Large and American Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enhanced Large and American Growth
The main advantage of trading using opposite Enhanced Large and American Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enhanced Large position performs unexpectedly, American 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 American Growth will offset losses from the drop in American Growth's long position.| Enhanced Large vs. Vanguard Total Stock | Enhanced Large vs. Vanguard 500 Index | Enhanced Large vs. Vanguard Total Stock | Enhanced Large vs. Vanguard Total Stock |
| American Growth vs. Rational Strategic Allocation | American Growth vs. T Rowe Price | American Growth vs. Enhanced Large Pany | American Growth vs. Washington Mutual Investors |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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