Correlation Between Victory Diversified and Capital Growth
Can any of the company-specific risk be diversified away by investing in both Victory Diversified and Capital Growth 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 Victory Diversified and Capital Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Victory Diversified Stock and Capital Growth Fund, you can compare the effects of market volatilities on Victory Diversified and Capital Growth 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 Victory Diversified with a short position of Capital Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Victory Diversified and Capital Growth.
Diversification Opportunities for Victory Diversified and Capital Growth
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Victory and Capital is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Victory Diversified Stock and Capital Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Growth and Victory Diversified 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 Victory Diversified Stock are associated (or correlated) with Capital Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Growth has no effect on the direction of Victory Diversified i.e., Victory Diversified and Capital Growth go up and down completely randomly.
Pair Corralation between Victory Diversified and Capital Growth
Assuming the 90 days horizon Victory Diversified is expected to generate 1.02 times less return on investment than Capital Growth. In addition to that, Victory Diversified is 1.23 times more volatile than Capital Growth Fund. It trades about 0.04 of its total potential returns per unit of risk. Capital Growth Fund is currently generating about 0.06 per unit of volatility. If you would invest 1,052 in Capital Growth Fund on November 27, 2024 and sell it today you would earn a total of 242.00 from holding Capital Growth Fund or generate 23.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Victory Diversified Stock vs. Capital Growth Fund
Performance |
| Timeline |
| Victory Diversified Stock |
| Capital Growth |
Victory Diversified and Capital Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Victory Diversified and Capital Growth
The main advantage of trading using opposite Victory Diversified and Capital Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Victory Diversified position performs unexpectedly, Capital Growth 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 Capital Growth will offset losses from the drop in Capital Growth's long position.The idea behind Victory Diversified Stock and Capital Growth Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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