Correlation Between Total Return and Emerging Growth
Can any of the company-specific risk be diversified away by investing in both Total Return and Emerging 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 Return and Emerging Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Total Return Bond and Emerging Growth Fund, you can compare the effects of market volatilities on Total Return and Emerging 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 Return with a short position of Emerging Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Total Return and Emerging Growth.
Diversification Opportunities for Total Return and Emerging Growth
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Total and Emerging is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Total Return Bond and Emerging Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Growth and Total Return 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 Return Bond are associated (or correlated) with Emerging Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Growth has no effect on the direction of Total Return i.e., Total Return and Emerging Growth go up and down completely randomly.
Pair Corralation between Total Return and Emerging Growth
Assuming the 90 days horizon Total Return Bond is expected to generate 0.24 times more return on investment than Emerging Growth. However, Total Return Bond is 4.25 times less risky than Emerging Growth. It trades about 0.11 of its potential returns per unit of risk. Emerging Growth Fund is currently generating about -0.07 per unit of risk. If you would invest 1,104 in Total Return Bond on September 12, 2024 and sell it today you would earn a total of 7.00 from holding Total Return Bond or generate 0.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Total Return Bond vs. Emerging Growth Fund
Performance |
| Timeline |
| Total Return Bond |
| Emerging Growth |
Total Return and Emerging Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Total Return and Emerging Growth
The main advantage of trading using opposite Total Return and Emerging Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Total Return position performs unexpectedly, Emerging 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 Emerging Growth will offset losses from the drop in Emerging Growth's long position.| Total Return vs. Alliancebernstein Global High | Total Return vs. Ab Global Risk | Total Return vs. Morningstar Global Income | Total Return vs. Siit Global Managed |
| Emerging Growth vs. Needham Aggressive Growth | Emerging Growth vs. Ultramid Cap Profund Ultramid Cap | Emerging Growth vs. HUMANA INC | Emerging 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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