Correlation Between Growth Strategy and Moderate Strategy
Can any of the company-specific risk be diversified away by investing in both Growth Strategy and Moderate Strategy 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 Moderate Strategy 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 Moderate Strategy Fund, you can compare the effects of market volatilities on Growth Strategy and Moderate Strategy 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 Moderate Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Strategy and Moderate Strategy.
Diversification Opportunities for Growth Strategy and Moderate Strategy
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Growth and Moderate is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund and Moderate Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moderate Strategy 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 Moderate Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moderate Strategy has no effect on the direction of Growth Strategy i.e., Growth Strategy and Moderate Strategy go up and down completely randomly.
Pair Corralation between Growth Strategy and Moderate Strategy
Assuming the 90 days horizon Growth Strategy Fund is expected to generate 1.63 times more return on investment than Moderate Strategy. However, Growth Strategy is 1.63 times more volatile than Moderate Strategy Fund. It trades about 0.08 of its potential returns per unit of risk. Moderate Strategy Fund is currently generating about 0.03 per unit of risk. If you would invest 1,181 in Growth Strategy Fund on August 25, 2024 and sell it today you would earn a total of 12.00 from holding Growth Strategy Fund or generate 1.02% 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. Moderate Strategy Fund
Performance |
| Timeline |
| Growth Strategy |
| Moderate Strategy |
Growth Strategy and Moderate Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Strategy and Moderate Strategy
The main advantage of trading using opposite Growth Strategy and Moderate Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Strategy position performs unexpectedly, Moderate Strategy 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 Moderate Strategy will offset losses from the drop in Moderate Strategy's long position.| Growth Strategy vs. The Hartford Small | Growth Strategy vs. Glg Intl Small | Growth Strategy vs. Champlain Small | Growth Strategy vs. Tax Managed Mid Small |
| Moderate Strategy vs. The Hartford Balanced | Moderate Strategy vs. HUMANA INC | Moderate Strategy vs. Aquagold International | Moderate Strategy 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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