Correlation Between Growth Fund and Advantage Portfolio
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Advantage Portfolio 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 Fund and Advantage Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Of and Advantage Portfolio Class, you can compare the effects of market volatilities on Growth Fund and Advantage Portfolio 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 Fund with a short position of Advantage Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Advantage Portfolio.
Diversification Opportunities for Growth Fund and Advantage Portfolio
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Advantage is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and Advantage Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Portfolio Class and Growth Fund 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 Fund Of are associated (or correlated) with Advantage Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Portfolio Class has no effect on the direction of Growth Fund i.e., Growth Fund and Advantage Portfolio go up and down completely randomly.
Pair Corralation between Growth Fund and Advantage Portfolio
Assuming the 90 days horizon Growth Fund is expected to generate 2.27 times less return on investment than Advantage Portfolio. But when comparing it to its historical volatility, Growth Fund Of is 1.35 times less risky than Advantage Portfolio. It trades about 0.12 of its potential returns per unit of risk. Advantage Portfolio Class is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,737 in Advantage Portfolio Class on September 1, 2024 and sell it today you would earn a total of 733.00 from holding Advantage Portfolio Class or generate 42.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Growth Fund Of vs. Advantage Portfolio Class
Performance |
| Timeline |
| Growth Fund |
| Advantage Portfolio Class |
Growth Fund and Advantage Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Advantage Portfolio
The main advantage of trading using opposite Growth Fund and Advantage Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Advantage Portfolio 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 Advantage Portfolio will offset losses from the drop in Advantage Portfolio's long position.| Growth Fund vs. Europacific Growth Fund | Growth Fund vs. Capital World Growth | Growth Fund vs. American Funds Fundamental | Growth Fund vs. Washington Mutual Investors |
| Advantage Portfolio vs. Emerging Markets Equity | Advantage Portfolio vs. Global Fixed Income | Advantage Portfolio vs. Global Fixed Income | Advantage Portfolio vs. Global Fixed Income |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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