Correlation Between Growth Fund and Largecap Growth
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Largecap Growth 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 Largecap Growth 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 Largecap Growth Fund, you can compare the effects of market volatilities on Growth Fund and Largecap Growth 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 Largecap Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Largecap Growth.
Diversification Opportunities for Growth Fund and Largecap Growth
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Largecap is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and Largecap Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Largecap Growth 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 Largecap Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Largecap Growth has no effect on the direction of Growth Fund i.e., Growth Fund and Largecap Growth go up and down completely randomly.
Pair Corralation between Growth Fund and Largecap Growth
Assuming the 90 days horizon Growth Fund Of is expected to generate 0.97 times more return on investment than Largecap Growth. However, Growth Fund Of is 1.03 times less risky than Largecap Growth. It trades about 0.36 of its potential returns per unit of risk. Largecap Growth Fund is currently generating about 0.31 per unit of risk. If you would invest 7,683 in Growth Fund Of on September 3, 2024 and sell it today you would earn a total of 493.00 from holding Growth Fund Of or generate 6.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Of vs. Largecap Growth Fund
Performance |
| Timeline |
| Growth Fund |
| Largecap Growth |
Growth Fund and Largecap Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Largecap Growth
The main advantage of trading using opposite Growth Fund and Largecap Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Largecap Growth 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 Largecap Growth will offset losses from the drop in Largecap Growth'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 |
| Largecap Growth vs. American Funds The | Largecap Growth vs. American Funds The | Largecap Growth vs. Growth Fund Of | Largecap Growth vs. Growth Fund Of |
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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