Correlation Between Growth Allocation and Aggressive Allocation
Can any of the company-specific risk be diversified away by investing in both Growth Allocation and Aggressive 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 Growth Allocation and Aggressive Allocation into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Allocation Fund and Aggressive Allocation Fund, you can compare the effects of market volatilities on Growth Allocation and Aggressive 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 Growth Allocation with a short position of Aggressive Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Allocation and Aggressive Allocation.
Diversification Opportunities for Growth Allocation and Aggressive Allocation
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Aggressive is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Growth Allocation Fund and Aggressive Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Allocation 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 Fund are associated (or correlated) with Aggressive Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Allocation has no effect on the direction of Growth Allocation i.e., Growth Allocation and Aggressive Allocation go up and down completely randomly.
Pair Corralation between Growth Allocation and Aggressive Allocation
Assuming the 90 days horizon Growth Allocation is expected to generate 1.19 times less return on investment than Aggressive Allocation. But when comparing it to its historical volatility, Growth Allocation Fund is 1.26 times less risky than Aggressive Allocation. It trades about 0.1 of its potential returns per unit of risk. Aggressive Allocation Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,066 in Aggressive Allocation Fund on August 31, 2024 and sell it today you would earn a total of 308.00 from holding Aggressive Allocation Fund or generate 28.89% 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 Fund vs. Aggressive Allocation Fund
Performance |
| Timeline |
| Growth Allocation |
| Aggressive Allocation |
Growth Allocation and Aggressive Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Allocation and Aggressive Allocation
The main advantage of trading using opposite Growth Allocation and Aggressive Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Allocation position performs unexpectedly, Aggressive 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 Aggressive Allocation will offset losses from the drop in Aggressive Allocation's long position.| Growth Allocation vs. Precious Metals And | Growth Allocation vs. Invesco Gold Special | Growth Allocation vs. Vy Goldman Sachs | Growth Allocation vs. Europac Gold Fund |
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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 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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