Correlation Between Income Fund and Income Growth
Can any of the company-specific risk be diversified away by investing in both Income Fund and Income 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 Income Fund and Income Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Fund Institutional and Income Growth Fund, you can compare the effects of market volatilities on Income Fund and Income 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 Income Fund with a short position of Income Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and Income Growth.
Diversification Opportunities for Income Fund and Income Growth
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Income and Income is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Institutional and Income Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Growth and Income 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 Income Fund Institutional are associated (or correlated) with Income Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Growth has no effect on the direction of Income Fund i.e., Income Fund and Income Growth go up and down completely randomly.
Pair Corralation between Income Fund and Income Growth
Assuming the 90 days horizon Income Fund Institutional is expected to generate 0.48 times more return on investment than Income Growth. However, Income Fund Institutional is 2.07 times less risky than Income Growth. It trades about 0.17 of its potential returns per unit of risk. Income Growth Fund is currently generating about -0.18 per unit of risk. If you would invest 907.00 in Income Fund Institutional on November 27, 2024 and sell it today you would earn a total of 9.00 from holding Income Fund Institutional or generate 0.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Fund Institutional vs. Income Growth Fund
Performance |
| Timeline |
| Income Fund Institutional |
| Income Growth |
Income Fund and Income Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Fund and Income Growth
The main advantage of trading using opposite Income Fund and Income Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund position performs unexpectedly, Income 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 Income Growth will offset losses from the drop in Income Growth's long position.| Income Fund vs. Voya Retirement Growth | Income Fund vs. American Funds Retirement | Income Fund vs. Franklin Lifesmart Retirement | Income Fund vs. Voya Target Retirement |
| Income Growth vs. Ultra Fund I | Income Growth vs. Value Fund I | Income Growth vs. Equity Growth Fund | Income Growth vs. International 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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