Correlation Between Growth Strategy and Commodities Strategy
Can any of the company-specific risk be diversified away by investing in both Growth Strategy and Commodities 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 Commodities 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 Commodities Strategy Fund, you can compare the effects of market volatilities on Growth Strategy and Commodities 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 Commodities Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Strategy and Commodities Strategy.
Diversification Opportunities for Growth Strategy and Commodities Strategy
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Growth and Commodities is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities 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 Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of Growth Strategy i.e., Growth Strategy and Commodities Strategy go up and down completely randomly.
Pair Corralation between Growth Strategy and Commodities Strategy
Assuming the 90 days horizon Growth Strategy is expected to generate 4.92 times less return on investment than Commodities Strategy. But when comparing it to its historical volatility, Growth Strategy Fund is 2.03 times less risky than Commodities Strategy. It trades about 0.07 of its potential returns per unit of risk. Commodities Strategy Fund is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 2,894 in Commodities Strategy Fund on September 12, 2024 and sell it today you would earn a total of 84.00 from holding Commodities Strategy Fund or generate 2.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Strategy Fund vs. Commodities Strategy Fund
Performance |
| Timeline |
| Growth Strategy |
| Commodities Strategy |
Growth Strategy and Commodities Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Strategy and Commodities Strategy
The main advantage of trading using opposite Growth Strategy and Commodities Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Strategy position performs unexpectedly, Commodities 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 Commodities Strategy will offset losses from the drop in Commodities Strategy's long position.| Growth Strategy vs. Smallcap Growth Fund | Growth Strategy vs. T Rowe Price | Growth Strategy vs. L Abbett Growth | Growth Strategy vs. Rational Defensive Growth |
| Commodities Strategy vs. Basic Materials Fund | Commodities Strategy vs. Energy Services Fund | Commodities Strategy vs. Energy Fund Investor | Commodities Strategy vs. Real Estate Fund |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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