Correlation Between Equity Growth and Balanced Strategy
Can any of the company-specific risk be diversified away by investing in both Equity Growth and Balanced 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 Equity Growth and Balanced Strategy 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 Balanced Strategy Fund, you can compare the effects of market volatilities on Equity Growth and Balanced 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 Equity Growth with a short position of Balanced Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Balanced Strategy.
Diversification Opportunities for Equity Growth and Balanced Strategy
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Equity and Balanced is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Strategy and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced Strategy 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 Balanced Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of Equity Growth i.e., Equity Growth and Balanced Strategy go up and down completely randomly.
Pair Corralation between Equity Growth and Balanced Strategy
Assuming the 90 days horizon Equity Growth Strategy is expected to generate 1.27 times more return on investment than Balanced Strategy. However, Equity Growth is 1.27 times more volatile than Balanced Strategy Fund. It trades about 0.15 of its potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.15 per unit of risk. If you would invest 1,500 in Equity Growth Strategy on October 24, 2024 and sell it today you would earn a total of 30.00 from holding Equity Growth Strategy or generate 2.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Growth Strategy vs. Balanced Strategy Fund
Performance |
| Timeline |
| Equity Growth Strategy |
| Balanced Strategy |
Equity Growth and Balanced Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Growth and Balanced Strategy
The main advantage of trading using opposite Equity Growth and Balanced Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, Balanced 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 Balanced Strategy will offset losses from the drop in Balanced Strategy's long position.| Equity Growth vs. William Blair Small | Equity Growth vs. Mutual Of America | Equity Growth vs. Mid Cap Value Profund | Equity Growth vs. Applied Finance Explorer |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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