Correlation Between Growth Fund and Strategic Allocation
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Strategic Allocation 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 Strategic Allocation 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 Strategic Allocation Moderate, you can compare the effects of market volatilities on Growth Fund and Strategic Allocation 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 Strategic Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Strategic Allocation.
Diversification Opportunities for Growth Fund and Strategic Allocation
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Strategic is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Investor and Strategic Allocation Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Allocation 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 Strategic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Allocation has no effect on the direction of Growth Fund i.e., Growth Fund and Strategic Allocation go up and down completely randomly.
Pair Corralation between Growth Fund and Strategic Allocation
Assuming the 90 days horizon Growth Fund Investor is expected to generate 2.24 times more return on investment than Strategic Allocation. However, Growth Fund is 2.24 times more volatile than Strategic Allocation Moderate. It trades about 0.06 of its potential returns per unit of risk. Strategic Allocation Moderate is currently generating about 0.13 per unit of risk. If you would invest 5,621 in Growth Fund Investor on September 3, 2024 and sell it today you would earn a total of 478.00 from holding Growth Fund Investor or generate 8.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Investor vs. Strategic Allocation Moderate
Performance |
| Timeline |
| Growth Fund Investor |
| Strategic Allocation |
Growth Fund and Strategic Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Strategic Allocation
The main advantage of trading using opposite Growth Fund and Strategic Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Strategic Allocation 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 Strategic Allocation will offset losses from the drop in Strategic Allocation'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 |
| Strategic Allocation vs. Jhancock Disciplined Value | Strategic Allocation vs. Qs Large Cap | Strategic Allocation vs. Qs Large Cap | Strategic Allocation vs. Avantis Large Cap |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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