Correlation Between Growth Allocation and Strategic Alternatives
Can any of the company-specific risk be diversified away by investing in both Growth Allocation and Strategic Alternatives 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 Strategic Alternatives 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 Strategic Alternatives Fund, you can compare the effects of market volatilities on Growth Allocation and Strategic Alternatives 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 Strategic Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Allocation and Strategic Alternatives.
Diversification Opportunities for Growth Allocation and Strategic Alternatives
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Growth and Strategic is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Growth Allocation Fund and Strategic Alternatives Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Alternatives 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 Strategic Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Alternatives has no effect on the direction of Growth Allocation i.e., Growth Allocation and Strategic Alternatives go up and down completely randomly.
Pair Corralation between Growth Allocation and Strategic Alternatives
Assuming the 90 days horizon Growth Allocation Fund is expected to generate 1.9 times more return on investment than Strategic Alternatives. However, Growth Allocation is 1.9 times more volatile than Strategic Alternatives Fund. It trades about 0.3 of its potential returns per unit of risk. Strategic Alternatives Fund is currently generating about 0.28 per unit of risk. If you would invest 1,304 in Growth Allocation Fund on September 1, 2024 and sell it today you would earn a total of 41.00 from holding Growth Allocation Fund or generate 3.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Allocation Fund vs. Strategic Alternatives Fund
Performance |
| Timeline |
| Growth Allocation |
| Strategic Alternatives |
Growth Allocation and Strategic Alternatives Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Allocation and Strategic Alternatives
The main advantage of trading using opposite Growth Allocation and Strategic Alternatives positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Allocation position performs unexpectedly, Strategic Alternatives 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 Alternatives will offset losses from the drop in Strategic Alternatives' long position.| Growth Allocation vs. Biotechnology Fund Class | Growth Allocation vs. Science Technology Fund | Growth Allocation vs. Pgim Jennison Technology | Growth Allocation vs. Allianzgi Technology 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |