Correlation Between Select Fund and Edgewood Growth
Can any of the company-specific risk be diversified away by investing in both Select Fund and Edgewood 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 Select Fund and Edgewood Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select Fund Investor and Edgewood Growth Fund, you can compare the effects of market volatilities on Select Fund and Edgewood 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 Select Fund with a short position of Edgewood Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Fund and Edgewood Growth.
Diversification Opportunities for Select Fund and Edgewood Growth
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Select and Edgewood is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Select Fund Investor and Edgewood Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewood Growth and Select 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 Select Fund Investor are associated (or correlated) with Edgewood Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewood Growth has no effect on the direction of Select Fund i.e., Select Fund and Edgewood Growth go up and down completely randomly.
Pair Corralation between Select Fund and Edgewood Growth
Assuming the 90 days horizon Select Fund is expected to generate 1.05 times less return on investment than Edgewood Growth. But when comparing it to its historical volatility, Select Fund Investor is 1.02 times less risky than Edgewood Growth. It trades about 0.08 of its potential returns per unit of risk. Edgewood Growth Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,770 in Edgewood Growth Fund on September 12, 2024 and sell it today you would earn a total of 1,269 from holding Edgewood Growth Fund or generate 33.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Fund Investor vs. Edgewood Growth Fund
Performance |
| Timeline |
| Select Fund Investor |
| Edgewood Growth |
Select Fund and Edgewood Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Fund and Edgewood Growth
The main advantage of trading using opposite Select Fund and Edgewood Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Fund position performs unexpectedly, Edgewood 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 Edgewood Growth will offset losses from the drop in Edgewood Growth's long position.| Select Fund vs. Growth Fund Investor | Select Fund vs. Ultra Fund Investor | Select Fund vs. Heritage Fund Investor | Select Fund vs. International Growth Fund |
| Edgewood Growth vs. Growth Fund Investor | Edgewood Growth vs. Select Fund Investor | Edgewood Growth vs. International Growth Fund | Edgewood Growth vs. Heritage Fund Investor |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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