Correlation Between Growth Fund and Plumb Balanced
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Plumb Balanced 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 Plumb Balanced into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Growth and Plumb Balanced Fund, you can compare the effects of market volatilities on Growth Fund and Plumb Balanced 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 Plumb Balanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Plumb Balanced.
Diversification Opportunities for Growth Fund and Plumb Balanced
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GROWTH and Plumb is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Growth and Plumb Balanced Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumb Balanced 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 Growth are associated (or correlated) with Plumb Balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumb Balanced has no effect on the direction of Growth Fund i.e., Growth Fund and Plumb Balanced go up and down completely randomly.
Pair Corralation between Growth Fund and Plumb Balanced
Assuming the 90 days horizon Growth Fund Growth is expected to generate 1.21 times more return on investment than Plumb Balanced. However, Growth Fund is 1.21 times more volatile than Plumb Balanced Fund. It trades about 0.07 of its potential returns per unit of risk. Plumb Balanced Fund is currently generating about 0.05 per unit of risk. If you would invest 1,616 in Growth Fund Growth on November 2, 2024 and sell it today you would earn a total of 290.00 from holding Growth Fund Growth or generate 17.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Growth vs. Plumb Balanced Fund
Performance |
| Timeline |
| Growth Fund Growth |
| Plumb Balanced |
Growth Fund and Plumb Balanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Plumb Balanced
The main advantage of trading using opposite Growth Fund and Plumb Balanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Plumb Balanced 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 Plumb Balanced will offset losses from the drop in Plumb Balanced's long position.| Growth Fund vs. Value Fund Value | Growth Fund vs. Stock Index Fund | Growth Fund vs. Small Company Stock Fund | Growth Fund vs. International Equity Fund |
| Plumb Balanced vs. Plumb Equity Fund | Plumb Balanced vs. Plumb Balanced | Plumb Balanced vs. Plumb Equity | Plumb Balanced vs. Plumb Balanced |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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