Correlation Between Select Equity and Growth Strategy
Can any of the company-specific risk be diversified away by investing in both Select Equity and Growth 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 Select Equity and Growth Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Equity Fund and Growth Strategy Fund, you can compare the effects of market volatilities on Select Equity and Growth 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 Select Equity with a short position of Growth Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Equity and Growth Strategy.
Diversification Opportunities for Select Equity and Growth Strategy
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Select and Growth is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Select Equity Fund and Growth Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Strategy and Select Equity 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 Select Equity Fund are associated (or correlated) with Growth Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Strategy has no effect on the direction of Select Equity i.e., Select Equity and Growth Strategy go up and down completely randomly.
Pair Corralation between Select Equity and Growth Strategy
Assuming the 90 days horizon Select Equity Fund is expected to generate 1.24 times more return on investment than Growth Strategy. However, Select Equity is 1.24 times more volatile than Growth Strategy Fund. It trades about 0.13 of its potential returns per unit of risk. Growth Strategy Fund is currently generating about 0.1 per unit of risk. If you would invest 1,457 in Select Equity Fund on September 1, 2024 and sell it today you would earn a total of 618.00 from holding Select Equity Fund or generate 42.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.73% |
| Values | Daily Returns |
Select Equity Fund vs. Growth Strategy Fund
Performance |
| Timeline |
| Select Equity |
| Growth Strategy |
Select Equity and Growth Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Equity and Growth Strategy
The main advantage of trading using opposite Select Equity and Growth Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Equity position performs unexpectedly, Growth 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 Growth Strategy will offset losses from the drop in Growth Strategy's long position.| Select Equity vs. Artisan Global Unconstrained | Select Equity vs. Ms Global Fixed | Select Equity vs. Morgan Stanley Global | Select Equity vs. Wasatch Global Opportunities |
| Growth Strategy vs. International Developed Markets | Growth Strategy vs. Global Real Estate | Growth Strategy vs. Global Real Estate | Growth Strategy vs. Global Real Estate |
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.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |