Correlation Between Total Market and Edgewood Growth
Can any of the company-specific risk be diversified away by investing in both Total Market and Edgewood 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 Total Market and Edgewood Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Market Portfolio and Edgewood Growth Fund, you can compare the effects of market volatilities on Total Market and Edgewood 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 Total Market with a short position of Edgewood Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Market and Edgewood Growth.
Diversification Opportunities for Total Market and Edgewood Growth
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Total and Edgewood is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Total Market Portfolio and Edgewood Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewood Growth and Total Market 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 Total Market Portfolio are associated (or correlated) with Edgewood Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewood Growth has no effect on the direction of Total Market i.e., Total Market and Edgewood Growth go up and down completely randomly.
Pair Corralation between Total Market and Edgewood Growth
Assuming the 90 days horizon Total Market Portfolio is expected to generate 1.05 times more return on investment than Edgewood Growth. However, Total Market is 1.05 times more volatile than Edgewood Growth Fund. It trades about 0.17 of its potential returns per unit of risk. Edgewood Growth Fund is currently generating about 0.14 per unit of risk. If you would invest 2,034 in Total Market Portfolio on August 29, 2024 and sell it today you would earn a total of 148.00 from holding Total Market Portfolio or generate 7.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 97.67% |
| Values | Daily Returns |
Total Market Portfolio vs. Edgewood Growth Fund
Performance |
| Timeline |
| Total Market Portfolio |
| Edgewood Growth |
Total Market and Edgewood Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Market and Edgewood Growth
The main advantage of trading using opposite Total Market and Edgewood Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Market position performs unexpectedly, Edgewood 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 Edgewood Growth will offset losses from the drop in Edgewood Growth's long position.| Total Market vs. Edgewood Growth Fund | Total Market vs. Johcm International Select | Total Market vs. Invesco Senior Loan | Total Market vs. Doubleline Shiller Enhanced |
| Edgewood Growth vs. T Rowe Price | Edgewood Growth vs. T Rowe Price | Edgewood Growth vs. T Rowe Price | Edgewood Growth vs. T Rowe Price |
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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