Correlation Between Growth Fund and Income Growth
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Income 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 Growth Fund and Income Growth 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 Income Growth Fund, you can compare the effects of market volatilities on Growth Fund and Income 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 Growth Fund with a short position of Income Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Income Growth.
Diversification Opportunities for Growth Fund and Income Growth
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Growth and Income is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Investor and Income Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Growth 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 Income Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Growth has no effect on the direction of Growth Fund i.e., Growth Fund and Income Growth go up and down completely randomly.
Pair Corralation between Growth Fund and Income Growth
Assuming the 90 days horizon Growth Fund is expected to generate 1.16 times less return on investment than Income Growth. In addition to that, Growth Fund is 1.17 times more volatile than Income Growth Fund. It trades about 0.25 of its total potential returns per unit of risk. Income Growth Fund is currently generating about 0.34 per unit of volatility. If you would invest 3,697 in Income Growth Fund on September 1, 2024 and sell it today you would earn a total of 228.00 from holding Income Growth Fund or generate 6.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Growth Fund Investor vs. Income Growth Fund
Performance |
| Timeline |
| Growth Fund Investor |
| Income Growth |
Growth Fund and Income Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Income Growth
The main advantage of trading using opposite Growth Fund and Income Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Income 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 Income Growth will offset losses from the drop in Income Growth's 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 |
| Income Growth vs. Fidelity Sai Convertible | Income Growth vs. Gabelli Convertible And | Income Growth vs. Putnam Convertible Incm Gwth | Income Growth vs. Absolute Convertible Arbitrage |
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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