Correlation Between Rational Defensive and Chase Growth
Can any of the company-specific risk be diversified away by investing in both Rational Defensive and Chase 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 Rational Defensive and Chase Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rational Defensive Growth and Chase Growth Fund, you can compare the effects of market volatilities on Rational Defensive and Chase 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 Rational Defensive with a short position of Chase Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Defensive and Chase Growth.
Diversification Opportunities for Rational Defensive and Chase Growth
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Rational and Chase is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Rational Defensive Growth and Chase Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chase Growth and Rational Defensive 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 Rational Defensive Growth are associated (or correlated) with Chase Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chase Growth has no effect on the direction of Rational Defensive i.e., Rational Defensive and Chase Growth go up and down completely randomly.
Pair Corralation between Rational Defensive and Chase Growth
Assuming the 90 days horizon Rational Defensive Growth is expected to generate 1.18 times more return on investment than Chase Growth. However, Rational Defensive is 1.18 times more volatile than Chase Growth Fund. It trades about 0.09 of its potential returns per unit of risk. Chase Growth Fund is currently generating about 0.09 per unit of risk. If you would invest 2,509 in Rational Defensive Growth on August 29, 2024 and sell it today you would earn a total of 1,503 from holding Rational Defensive Growth or generate 59.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rational Defensive Growth vs. Chase Growth Fund
Performance |
| Timeline |
| Rational Defensive Growth |
| Chase Growth |
Rational Defensive and Chase Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rational Defensive and Chase Growth
The main advantage of trading using opposite Rational Defensive and Chase Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rational Defensive position performs unexpectedly, Chase 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 Chase Growth will offset losses from the drop in Chase Growth's long position.| Rational Defensive vs. Growth Fund Of | Rational Defensive vs. HUMANA INC | Rational Defensive vs. Aquagold International | Rational Defensive vs. Barloworld Ltd ADR |
| Chase Growth vs. Growth Fund Of | Chase Growth vs. HUMANA INC | Chase Growth vs. Aquagold International | Chase Growth vs. Barloworld Ltd ADR |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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