Correlation Between Growth Fund and Core Plus
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Core Plus 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 Fund and Core Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Investor and Core Plus Fund, you can compare the effects of market volatilities on Growth Fund and Core Plus 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 Fund with a short position of Core Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Core Plus.
Diversification Opportunities for Growth Fund and Core Plus
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Growth and Core is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Investor and Core Plus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Plus Fund and Growth Fund 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 Fund Investor are associated (or correlated) with Core Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Plus Fund has no effect on the direction of Growth Fund i.e., Growth Fund and Core Plus go up and down completely randomly.
Pair Corralation between Growth Fund and Core Plus
Assuming the 90 days horizon Growth Fund Investor is expected to generate 2.35 times more return on investment than Core Plus. However, Growth Fund is 2.35 times more volatile than Core Plus Fund. It trades about 0.1 of its potential returns per unit of risk. Core Plus Fund is currently generating about 0.03 per unit of risk. If you would invest 3,916 in Growth Fund Investor on August 27, 2024 and sell it today you would earn a total of 2,115 from holding Growth Fund Investor or generate 54.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Investor vs. Core Plus Fund
Performance |
| Timeline |
| Growth Fund Investor |
| Core Plus Fund |
Growth Fund and Core Plus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Core Plus
The main advantage of trading using opposite Growth Fund and Core Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Core Plus 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 Core Plus will offset losses from the drop in Core Plus' long position.| Growth Fund vs. Select Fund Investor | Growth Fund vs. Ultra Fund Investor | Growth Fund vs. Heritage Fund Investor | Growth Fund vs. International Growth Fund |
| Core Plus vs. Mid Cap Value | Core Plus vs. Equity Growth Fund | Core Plus vs. Income Growth Fund | Core Plus vs. Diversified Bond Fund |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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