Correlation Between Real Assets and Growth Portfolio
Can any of the company-specific risk be diversified away by investing in both Real Assets and Growth Portfolio 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 Real Assets and Growth Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Real Assets Portfolio and Growth Portfolio Class, you can compare the effects of market volatilities on Real Assets and Growth Portfolio 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 Real Assets with a short position of Growth Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Assets and Growth Portfolio.
Diversification Opportunities for Real Assets and Growth Portfolio
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Real and Growth is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Real Assets Portfolio and Growth Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Portfolio Class and Real Assets 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 Real Assets Portfolio are associated (or correlated) with Growth Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Portfolio Class has no effect on the direction of Real Assets i.e., Real Assets and Growth Portfolio go up and down completely randomly.
Pair Corralation between Real Assets and Growth Portfolio
Assuming the 90 days horizon Real Assets is expected to generate 12.03 times less return on investment than Growth Portfolio. But when comparing it to its historical volatility, Real Assets Portfolio is 3.76 times less risky than Growth Portfolio. It trades about 0.03 of its potential returns per unit of risk. Growth Portfolio Class is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,615 in Growth Portfolio Class on October 20, 2024 and sell it today you would earn a total of 2,722 from holding Growth Portfolio Class or generate 104.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Real Assets Portfolio vs. Growth Portfolio Class
Performance |
| Timeline |
| Real Assets Portfolio |
| Growth Portfolio Class |
Real Assets and Growth Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Real Assets and Growth Portfolio
The main advantage of trading using opposite Real Assets and Growth Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Assets position performs unexpectedly, Growth Portfolio 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 Portfolio will offset losses from the drop in Growth Portfolio's long position.| Real Assets vs. Emerging Markets Equity | Real Assets vs. Global Fixed Income | Real Assets vs. Global Fixed Income | Real Assets vs. Global Fixed Income |
| Growth Portfolio vs. Mid Cap Growth | Growth Portfolio vs. Morgan Stanley Multi | Growth Portfolio vs. Small Pany Growth | Growth Portfolio vs. Blackrock Science Technology |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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