Correlation Between Growth Opportunities and Select Fund
Can any of the company-specific risk be diversified away by investing in both Growth Opportunities and Select 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 Opportunities and Select Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Opportunities Fund and Select Fund R6, you can compare the effects of market volatilities on Growth Opportunities and Select 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 Opportunities with a short position of Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Opportunities and Select Fund.
Diversification Opportunities for Growth Opportunities and Select Fund
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Select is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Growth Opportunities Fund and Select Fund R6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund R6 and Growth Opportunities 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 Opportunities Fund are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund R6 has no effect on the direction of Growth Opportunities i.e., Growth Opportunities and Select Fund go up and down completely randomly.
Pair Corralation between Growth Opportunities and Select Fund
Assuming the 90 days horizon Growth Opportunities Fund is expected to generate 0.97 times more return on investment than Select Fund. However, Growth Opportunities Fund is 1.03 times less risky than Select Fund. It trades about 0.13 of its potential returns per unit of risk. Select Fund R6 is currently generating about 0.11 per unit of risk. If you would invest 3,075 in Growth Opportunities Fund on September 12, 2024 and sell it today you would earn a total of 2,827 from holding Growth Opportunities Fund or generate 91.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Growth Opportunities Fund vs. Select Fund R6
Performance |
| Timeline |
| Growth Opportunities |
| Select Fund R6 |
Growth Opportunities and Select Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Opportunities and Select Fund
The main advantage of trading using opposite Growth Opportunities and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Opportunities position performs unexpectedly, Select 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 Select Fund will offset losses from the drop in Select Fund's long position.The idea behind Growth Opportunities Fund and Select Fund R6 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.
| Select Fund vs. American Funds The | Select Fund vs. American Funds The | Select Fund vs. Growth Fund Of | Select Fund vs. Growth Fund Of |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
Other Complementary Tools
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |