Correlation Between Growth Strategy and Government Long
Can any of the company-specific risk be diversified away by investing in both Growth Strategy and Government Long 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 Growth Strategy and Government Long into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Strategy Fund and Government Long Bond, you can compare the effects of market volatilities on Growth Strategy and Government Long 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 Growth Strategy with a short position of Government Long. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Strategy and Government Long.
Diversification Opportunities for Growth Strategy and Government Long
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Growth and Government is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund and Government Long Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Government Long Bond and Growth Strategy 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 Growth Strategy Fund are associated (or correlated) with Government Long. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Government Long Bond has no effect on the direction of Growth Strategy i.e., Growth Strategy and Government Long go up and down completely randomly.
Pair Corralation between Growth Strategy and Government Long
Assuming the 90 days horizon Growth Strategy Fund is expected to generate 0.76 times more return on investment than Government Long. However, Growth Strategy Fund is 1.32 times less risky than Government Long. It trades about 0.19 of its potential returns per unit of risk. Government Long Bond is currently generating about 0.06 per unit of risk. If you would invest 1,261 in Growth Strategy Fund on November 5, 2024 and sell it today you would earn a total of 29.00 from holding Growth Strategy Fund or generate 2.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Strategy Fund vs. Government Long Bond
Performance |
| Timeline |
| Growth Strategy |
| Government Long Bond |
Growth Strategy and Government Long Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Strategy and Government Long
The main advantage of trading using opposite Growth Strategy and Government Long positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Strategy position performs unexpectedly, Government Long 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 Government Long will offset losses from the drop in Government Long's long position.| Growth Strategy vs. Health Care Ultrasector | Growth Strategy vs. Eaton Vance Worldwide | Growth Strategy vs. Alphacentric Lifesci Healthcare | Growth Strategy vs. Highland Longshort Healthcare |
| Government Long vs. Barings Active Short | Government Long vs. Intal High Relative | Government Long vs. Ab Small Cap | Government Long vs. Tfa Alphagen Growth |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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