Correlation Between Growth Allocation and Balanced Allocation
Can any of the company-specific risk be diversified away by investing in both Growth Allocation and Balanced 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 Balanced 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 Balanced Allocation Fund, you can compare the effects of market volatilities on Growth Allocation and Balanced 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 Balanced Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Allocation and Balanced Allocation.
Diversification Opportunities for Growth Allocation and Balanced Allocation
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Growth and Balanced is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Growth Allocation Fund and Balanced Allocation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced 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 Balanced Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Allocation has no effect on the direction of Growth Allocation i.e., Growth Allocation and Balanced Allocation go up and down completely randomly.
Pair Corralation between Growth Allocation and Balanced Allocation
Assuming the 90 days horizon Growth Allocation Fund is expected to under-perform the Balanced Allocation. In addition to that, Growth Allocation is 1.58 times more volatile than Balanced Allocation Fund. It trades about -0.39 of its total potential returns per unit of risk. Balanced Allocation Fund is currently generating about -0.26 per unit of volatility. If you would invest 1,180 in Balanced Allocation Fund on October 12, 2024 and sell it today you would lose (27.00) from holding Balanced Allocation Fund or give up 2.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Allocation Fund vs. Balanced Allocation Fund
Performance |
| Timeline |
| Growth Allocation |
| Balanced Allocation |
Growth Allocation and Balanced Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Allocation and Balanced Allocation
The main advantage of trading using opposite Growth Allocation and Balanced Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Allocation position performs unexpectedly, Balanced 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 Balanced Allocation will offset losses from the drop in Balanced Allocation's long position.| Growth Allocation vs. Barings Global Floating | Growth Allocation vs. Alternative Asset Allocation | Growth Allocation vs. Rational Strategic Allocation | Growth Allocation vs. Balanced Allocation Fund |
| Balanced Allocation vs. Growth Allocation Fund | Balanced Allocation vs. Defensive Market Strategies | Balanced Allocation vs. Defensive Market Strategies | Balanced Allocation vs. Value Equity Investor |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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