Correlation Between Short-term Bond and Growth Fund
Can any of the company-specific risk be diversified away by investing in both Short-term Bond and Growth Fund 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 Short-term Bond and Growth Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Bond Fund and Growth Fund Growth, you can compare the effects of market volatilities on Short-term Bond and Growth Fund 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 Short-term Bond with a short position of Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short-term Bond and Growth Fund.
Diversification Opportunities for Short-term Bond and Growth Fund
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Short-term and Growth is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Bond Fund and Growth Fund Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund Growth and Short-term Bond 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 Short Term Bond Fund are associated (or correlated) with Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund Growth has no effect on the direction of Short-term Bond i.e., Short-term Bond and Growth Fund go up and down completely randomly.
Pair Corralation between Short-term Bond and Growth Fund
Assuming the 90 days horizon Short-term Bond is expected to generate 31.88 times less return on investment than Growth Fund. But when comparing it to its historical volatility, Short Term Bond Fund is 6.76 times less risky than Growth Fund. It trades about 0.07 of its potential returns per unit of risk. Growth Fund Growth is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,852 in Growth Fund Growth on September 1, 2024 and sell it today you would earn a total of 123.00 from holding Growth Fund Growth or generate 6.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Term Bond Fund vs. Growth Fund Growth
Performance |
| Timeline |
| Short Term Bond |
| Growth Fund Growth |
Short-term Bond and Growth Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short-term Bond and Growth Fund
The main advantage of trading using opposite Short-term Bond and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short-term Bond position performs unexpectedly, Growth Fund 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 Growth Fund will offset losses from the drop in Growth Fund's long position.| Short-term Bond vs. T Rowe Price | Short-term Bond vs. Tfa Alphagen Growth | Short-term Bond vs. Nationwide Growth Fund | Short-term Bond vs. Victory Rs Small |
| 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 |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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