Correlation Between Growth Strategy and Equity Growth
Can any of the company-specific risk be diversified away by investing in both Growth Strategy and Equity 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 Growth Strategy and Equity Growth 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 Equity Growth Strategy, you can compare the effects of market volatilities on Growth Strategy and Equity 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 Growth Strategy with a short position of Equity Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Strategy and Equity Growth.
Diversification Opportunities for Growth Strategy and Equity Growth
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Growth and Equity is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund and Equity Growth Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth 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 Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth Strategy has no effect on the direction of Growth Strategy i.e., Growth Strategy and Equity Growth go up and down completely randomly.
Pair Corralation between Growth Strategy and Equity Growth
Assuming the 90 days horizon Growth Strategy is expected to generate 1.08 times less return on investment than Equity Growth. But when comparing it to its historical volatility, Growth Strategy Fund is 1.09 times less risky than Equity Growth. It trades about 0.34 of its potential returns per unit of risk. Equity Growth Strategy is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,574 in Equity Growth Strategy on September 1, 2024 and sell it today you would earn a total of 62.00 from holding Equity Growth Strategy or generate 3.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Strategy Fund vs. Equity Growth Strategy
Performance |
| Timeline |
| Growth Strategy |
| Equity Growth Strategy |
Growth Strategy and Equity Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Strategy and Equity Growth
The main advantage of trading using opposite Growth Strategy and Equity Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Strategy position performs unexpectedly, Equity 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 Equity Growth will offset losses from the drop in Equity Growth's long position.| Growth Strategy vs. Thrivent Income Fund | Growth Strategy vs. Ab Bond Inflation | Growth Strategy vs. California Bond Fund | Growth Strategy vs. Ultra Short Fixed Income |
| Equity Growth vs. American Century High | Equity Growth vs. Prudential Short Duration | Equity Growth vs. Multi Manager High Yield | Equity Growth vs. Valic Company I |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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