Correlation Between Growth Allocation and Consumer Finance
Can any of the company-specific risk be diversified away by investing in both Growth Allocation and Consumer Finance 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 Consumer Finance 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 Consumer Finance Portfolio, you can compare the effects of market volatilities on Growth Allocation and Consumer Finance 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 Consumer Finance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Allocation and Consumer Finance.
Diversification Opportunities for Growth Allocation and Consumer Finance
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Growth and Consumer is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Growth Allocation Index and Consumer Finance Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Finance Por 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 Consumer Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Finance Por has no effect on the direction of Growth Allocation i.e., Growth Allocation and Consumer Finance go up and down completely randomly.
Pair Corralation between Growth Allocation and Consumer Finance
Assuming the 90 days horizon Growth Allocation is expected to generate 3.08 times less return on investment than Consumer Finance. But when comparing it to its historical volatility, Growth Allocation Index is 2.01 times less risky than Consumer Finance. It trades about 0.12 of its potential returns per unit of risk. Consumer Finance Portfolio is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 1,566 in Consumer Finance Portfolio on September 1, 2024 and sell it today you would earn a total of 444.00 from holding Consumer Finance Portfolio or generate 28.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Growth Allocation Index vs. Consumer Finance Portfolio
Performance |
| Timeline |
| Growth Allocation Index |
| Consumer Finance Por |
Growth Allocation and Consumer Finance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Allocation and Consumer Finance
The main advantage of trading using opposite Growth Allocation and Consumer Finance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Allocation position performs unexpectedly, Consumer Finance 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 Consumer Finance will offset losses from the drop in Consumer Finance's long position.| Growth Allocation vs. Multimedia Portfolio Multimedia | Growth Allocation vs. Ms Global Fixed | Growth Allocation vs. Ab Select Equity | Growth Allocation vs. Ultra Short Fixed Income |
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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