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
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Permanent and Aggressive is 0.84. 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 Class is expected to under-perform the Aggressive Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Permanent Portfolio Class is 2.09 times less risky than Aggressive Growth. The mutual fund trades about -0.31 of its potential returns per unit of risk. The Aggressive Growth Portfolio is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 10,152 in Aggressive Growth Portfolio on September 25, 2024 and sell it today you would lose (461.00) from holding Aggressive Growth Portfolio or give up 4.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.24% |
| Values | Daily Returns |
Permanent Portfolio Class vs. Aggressive Growth Portfolio
Performance |
| Timeline |
| Permanent Portfolio Class |
| Aggressive Growth |
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. Fpa Crescent Fund | Permanent Portfolio vs. Amg Yacktman Fund | Permanent Portfolio vs. Hussman Strategic Total | Permanent Portfolio vs. Oakmark Equity And |
| Aggressive Growth vs. Versatile Bond Portfolio | Aggressive Growth vs. Short Term Treasury Portfolio | Aggressive Growth vs. Permanent Portfolio Class | Aggressive Growth vs. Dreyfus Balanced Opportunity |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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