Correlation Between Equity Growth and World Energy
Can any of the company-specific risk be diversified away by investing in both Equity Growth and World Energy 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 Equity Growth and World Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Strategy and World Energy Fund, you can compare the effects of market volatilities on Equity Growth and World Energy 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 Equity Growth with a short position of World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and World Energy.
Diversification Opportunities for Equity Growth and World Energy
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equity and World is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Strategy and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy and Equity Growth 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 Equity Growth Strategy are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of Equity Growth i.e., Equity Growth and World Energy go up and down completely randomly.
Pair Corralation between Equity Growth and World Energy
Assuming the 90 days horizon Equity Growth is expected to generate 2.74 times less return on investment than World Energy. But when comparing it to its historical volatility, Equity Growth Strategy is 2.28 times less risky than World Energy. It trades about 0.32 of its potential returns per unit of risk. World Energy Fund is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 1,405 in World Energy Fund on September 3, 2024 and sell it today you would earn a total of 141.00 from holding World Energy Fund or generate 10.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Growth Strategy vs. World Energy Fund
Performance |
| Timeline |
| Equity Growth Strategy |
| World Energy |
Equity Growth and World Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and World Energy
The main advantage of trading using opposite Equity Growth and World Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, World Energy 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 World Energy will offset losses from the drop in World Energy's long position.| Equity Growth vs. World Energy Fund | Equity Growth vs. Firsthand Alternative Energy | Equity Growth vs. Goehring Rozencwajg Resources | Equity Growth vs. Energy Basic Materials |
| World Energy vs. Fisher Small Cap | World Energy vs. Rbc Small Cap | World Energy vs. Us Small Cap | World Energy vs. Oklahoma College Savings |
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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