Correlation Between Growth Allocation and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both Growth Allocation and Aggressive 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 Growth Allocation and Aggressive Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Allocation Index and Aggressive Growth Allocation, you can compare the effects of market volatilities on Growth Allocation and Aggressive 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 Growth Allocation with a short position of Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Allocation and Aggressive Growth.
Diversification Opportunities for Growth Allocation and Aggressive Growth
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Growth and Aggressive is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Growth Allocation Index and Aggressive Growth Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth and Growth Allocation 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 Allocation Index are associated (or correlated) with Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Growth Allocation i.e., Growth Allocation and Aggressive Growth go up and down completely randomly.
Pair Corralation between Growth Allocation and Aggressive Growth
Assuming the 90 days horizon Growth Allocation is expected to generate 1.2 times less return on investment than Aggressive Growth. But when comparing it to its historical volatility, Growth Allocation Index is 1.19 times less risky than Aggressive Growth. It trades about 0.13 of its potential returns per unit of risk. Aggressive Growth Allocation is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,146 in Aggressive Growth Allocation on August 30, 2024 and sell it today you would earn a total of 21.00 from holding Aggressive Growth Allocation or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Allocation Index vs. Aggressive Growth Allocation
Performance |
| Timeline |
| Growth Allocation Index |
| Aggressive Growth |
Growth Allocation and Aggressive Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Allocation and Aggressive Growth
The main advantage of trading using opposite Growth Allocation and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Allocation position performs unexpectedly, Aggressive 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.| Growth Allocation vs. Fidelity Asset Manager | Growth Allocation vs. Fidelity Asset Manager | Growth Allocation vs. Fidelity Asset Manager | Growth Allocation vs. Fidelity Stock Selector |
| Aggressive Growth vs. Fidelity Asset Manager | Aggressive Growth vs. Fidelity Asset Manager | Aggressive Growth vs. Fidelity Asset Manager | Aggressive Growth vs. Fidelity International Capital |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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