Correlation Between Commodities Strategy and Growth Strategy
Can any of the company-specific risk be diversified away by investing in both Commodities Strategy 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 Commodities Strategy and Growth Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commodities Strategy Fund and Growth Strategy Fund, you can compare the effects of market volatilities on Commodities Strategy 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 Commodities Strategy with a short position of Growth Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commodities Strategy and Growth Strategy.
Diversification Opportunities for Commodities Strategy and Growth Strategy
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Commodities and Growth is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Commodities Strategy 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 Commodities 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 Commodities Strategy 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 Commodities Strategy i.e., Commodities Strategy and Growth Strategy go up and down completely randomly.
Pair Corralation between Commodities Strategy and Growth Strategy
Assuming the 90 days horizon Commodities Strategy Fund is expected to generate 2.03 times more return on investment than Growth Strategy. However, Commodities Strategy is 2.03 times more volatile than Growth Strategy Fund. It trades about 0.16 of its potential returns per unit of risk. Growth Strategy Fund is currently generating about 0.07 per unit of risk. If you would invest 2,894 in Commodities Strategy Fund on September 12, 2024 and sell it today you would earn a total of 84.00 from holding Commodities Strategy Fund or generate 2.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commodities Strategy Fund vs. Growth Strategy Fund
Performance |
| Timeline |
| Commodities Strategy |
| Growth Strategy |
Commodities Strategy and Growth Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commodities Strategy and Growth Strategy
The main advantage of trading using opposite Commodities Strategy and Growth Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commodities Strategy 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.| Commodities Strategy vs. Basic Materials Fund | Commodities Strategy vs. Energy Services Fund | Commodities Strategy vs. Energy Fund Investor | Commodities Strategy vs. Real Estate Fund |
| Growth Strategy vs. Smallcap Growth Fund | Growth Strategy vs. T Rowe Price | Growth Strategy vs. L Abbett Growth | Growth Strategy vs. Rational Defensive Growth |
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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