Correlation Between Short Term and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both Short Term and Aggressive 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 Short Term and Aggressive Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Short Term Government Fund and Aggressive Growth Fund, you can compare the effects of market volatilities on Short Term and Aggressive 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 Short Term with a short position of Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Short Term and Aggressive Growth.
Diversification Opportunities for Short Term and Aggressive Growth
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Short and Aggressive is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund and Aggressive Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth and Short Term 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 Short Term Government Fund are associated (or correlated) with Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Short Term i.e., Short Term and Aggressive Growth go up and down completely randomly.
Pair Corralation between Short Term and Aggressive Growth
Assuming the 90 days horizon Short Term is expected to generate 16.73 times less return on investment than Aggressive Growth. But when comparing it to its historical volatility, Short Term Government Fund is 6.85 times less risky than Aggressive Growth. It trades about 0.05 of its potential returns per unit of risk. Aggressive Growth Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 3,536 in Aggressive Growth Fund on September 12, 2024 and sell it today you would earn a total of 3,604 from holding Aggressive Growth Fund or generate 101.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Short Term Government Fund vs. Aggressive Growth Fund
Performance |
| Timeline |
| Short Term Government |
| Aggressive Growth |
Short Term and Aggressive Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Short Term and Aggressive Growth
The main advantage of trading using opposite Short Term and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Term position performs unexpectedly, Aggressive 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.| Short Term vs. T Rowe Price | Short Term vs. Locorr Market Trend | Short Term vs. Kinetics Market Opportunities | Short Term vs. Transamerica Emerging Markets |
| Aggressive Growth vs. Eventide Healthcare Life | Aggressive Growth vs. Highland Longshort Healthcare | Aggressive Growth vs. Fidelity Advisor Health | Aggressive Growth vs. Vanguard Health Care |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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