Correlation Between Permanent Portfolio and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both Permanent Portfolio and Aggressive 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 Permanent Portfolio and Aggressive Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permanent Portfolio Class and Aggressive Growth Portfolio, you can compare the effects of market volatilities on Permanent Portfolio and Aggressive 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 Permanent Portfolio with a short position of Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permanent Portfolio and Aggressive Growth.
Diversification Opportunities for Permanent Portfolio and Aggressive Growth
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Permanent and AGGRESSIVE is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Permanent Portfolio Class and Aggressive Growth Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth and Permanent Portfolio 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 Permanent Portfolio Class are associated (or correlated) with Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Permanent Portfolio i.e., Permanent Portfolio and Aggressive Growth go up and down completely randomly.
Pair Corralation between Permanent Portfolio and Aggressive Growth
Assuming the 90 days horizon Permanent Portfolio is expected to generate 2.07 times less return on investment than Aggressive Growth. But when comparing it to its historical volatility, Permanent Portfolio Class is 2.19 times less risky than Aggressive Growth. It trades about 0.15 of its potential returns per unit of risk. Aggressive Growth Portfolio is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 7,421 in Aggressive Growth Portfolio on November 9, 2024 and sell it today you would earn a total of 3,681 from holding Aggressive Growth Portfolio or generate 49.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 83.15% |
| Values | Daily Returns |
Permanent Portfolio Class vs. Aggressive Growth Portfolio
Performance |
| Timeline |
| Permanent Portfolio Class |
| Aggressive Growth |
Risk-Adjusted Performance
Good
Weak | Strong |
Permanent Portfolio and Aggressive Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permanent Portfolio and Aggressive Growth
The main advantage of trading using opposite Permanent Portfolio and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permanent Portfolio position performs unexpectedly, Aggressive 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.| Permanent Portfolio vs. The Fairholme Fund | Permanent Portfolio vs. Fpa Crescent Fund | Permanent Portfolio vs. Amg Yacktman Fund | Permanent Portfolio vs. Hussman Strategic Total |
| Aggressive Growth vs. Tax Managed International Equity | Aggressive Growth vs. Artisan Select Equity | Aggressive Growth vs. Gmo Global Equity | Aggressive Growth vs. Rbc China Equity |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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