Correlation Between Aggressive Growth and Aggressive Investors
Can any of the company-specific risk be diversified away by investing in both Aggressive Growth and Aggressive Investors 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 Aggressive Growth and Aggressive Investors into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aggressive Growth Allocation and Aggressive Investors 1, you can compare the effects of market volatilities on Aggressive Growth and Aggressive Investors 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 Aggressive Growth with a short position of Aggressive Investors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Growth and Aggressive Investors.
Diversification Opportunities for Aggressive Growth and Aggressive Investors
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Aggressive and Aggressive is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Growth Allocation and Aggressive Investors 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Investors and Aggressive 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 Aggressive Growth Allocation are associated (or correlated) with Aggressive Investors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Investors has no effect on the direction of Aggressive Growth i.e., Aggressive Growth and Aggressive Investors go up and down completely randomly.
Pair Corralation between Aggressive Growth and Aggressive Investors
Assuming the 90 days horizon Aggressive Growth is expected to generate 1.91 times less return on investment than Aggressive Investors. But when comparing it to its historical volatility, Aggressive Growth Allocation is 1.42 times less risky than Aggressive Investors. It trades about 0.11 of its potential returns per unit of risk. Aggressive Investors 1 is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 6,454 in Aggressive Investors 1 on September 3, 2024 and sell it today you would earn a total of 4,030 from holding Aggressive Investors 1 or generate 62.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aggressive Growth Allocation vs. Aggressive Investors 1
Performance |
| Timeline |
| Aggressive Growth |
| Aggressive Investors |
Aggressive Growth and Aggressive Investors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aggressive Growth and Aggressive Investors
The main advantage of trading using opposite Aggressive Growth and Aggressive Investors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aggressive Growth position performs unexpectedly, Aggressive Investors 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 Aggressive Investors will offset losses from the drop in Aggressive Investors' long position.| Aggressive Growth vs. American Funds Growth | Aggressive Growth vs. American Funds Growth | Aggressive Growth vs. Franklin Mutual Shares | Aggressive Growth vs. Franklin Mutual Shares |
| Aggressive Investors vs. Aggressive Balanced Allocation | Aggressive Investors vs. Aggressive Growth Fund | Aggressive Investors vs. Aggressive Growth Allocation |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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