Correlation Between Green Century and Strategic Allocation
Can any of the company-specific risk be diversified away by investing in both Green Century and Strategic Allocation 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 Green Century and Strategic Allocation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Green Century Equity and Strategic Allocation Servative, you can compare the effects of market volatilities on Green Century and Strategic Allocation 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 Green Century with a short position of Strategic Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Green Century and Strategic Allocation.
Diversification Opportunities for Green Century and Strategic Allocation
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Green and Strategic is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Green Century Equity and Strategic Allocation Servative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Allocation and Green Century 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 Green Century Equity are associated (or correlated) with Strategic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Allocation has no effect on the direction of Green Century i.e., Green Century and Strategic Allocation go up and down completely randomly.
Pair Corralation between Green Century and Strategic Allocation
Assuming the 90 days horizon Green Century Equity is expected to generate 2.53 times more return on investment than Strategic Allocation. However, Green Century is 2.53 times more volatile than Strategic Allocation Servative. It trades about 0.1 of its potential returns per unit of risk. Strategic Allocation Servative is currently generating about 0.15 per unit of risk. If you would invest 8,342 in Green Century Equity on September 1, 2024 and sell it today you would earn a total of 1,075 from holding Green Century Equity or generate 12.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Green Century Equity vs. Strategic Allocation Servative
Performance |
| Timeline |
| Green Century Equity |
| Strategic Allocation |
Green Century and Strategic Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Green Century and Strategic Allocation
The main advantage of trading using opposite Green Century and Strategic Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Green Century position performs unexpectedly, Strategic Allocation 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 Strategic Allocation will offset losses from the drop in Strategic Allocation's long position.| Green Century vs. Green Century Balanced | Green Century vs. Portfolio 21 Global | Green Century vs. New Alternatives Fund | Green Century vs. Pax Esg Beta |
| Strategic Allocation vs. Mid Cap Value | Strategic Allocation vs. Equity Growth Fund | Strategic Allocation vs. Income Growth Fund | Strategic Allocation vs. Diversified Bond 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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