Correlation Between Growth Fund and Nova Fund
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Nova Fund 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 Fund and Nova Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Of and Nova Fund Class, you can compare the effects of market volatilities on Growth Fund and Nova Fund 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 Fund with a short position of Nova Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Nova Fund.
Diversification Opportunities for Growth Fund and Nova Fund
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Growth and Nova is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and Nova Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nova Fund Class and Growth Fund 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 Fund Of are associated (or correlated) with Nova Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nova Fund Class has no effect on the direction of Growth Fund i.e., Growth Fund and Nova Fund go up and down completely randomly.
Pair Corralation between Growth Fund and Nova Fund
Assuming the 90 days horizon Growth Fund Of is expected to generate 0.64 times more return on investment than Nova Fund. However, Growth Fund Of is 1.55 times less risky than Nova Fund. It trades about 0.08 of its potential returns per unit of risk. Nova Fund Class is currently generating about 0.04 per unit of risk. If you would invest 4,944 in Growth Fund Of on September 3, 2024 and sell it today you would earn a total of 2,462 from holding Growth Fund Of or generate 49.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Of vs. Nova Fund Class
Performance |
| Timeline |
| Growth Fund |
| Nova Fund Class |
Growth Fund and Nova Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Nova Fund
The main advantage of trading using opposite Growth Fund and Nova Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Nova Fund 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 Nova Fund will offset losses from the drop in Nova Fund's long position.| Growth Fund vs. Europacific Growth Fund | Growth Fund vs. Capital World Growth | Growth Fund vs. Smallcap World Fund | Growth Fund vs. American Balanced 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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