Correlation Between Select Fund and Value Fund
Can any of the company-specific risk be diversified away by investing in both Select Fund and Value Fund 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 Value Fund 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 Value Fund A, you can compare the effects of market volatilities on Select Fund and Value Fund 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 Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Fund and Value Fund.
Diversification Opportunities for Select Fund and Value Fund
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Select and Value is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Select Fund Investor and Value Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund A 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 Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund A has no effect on the direction of Select Fund i.e., Select Fund and Value Fund go up and down completely randomly.
Pair Corralation between Select Fund and Value Fund
Assuming the 90 days horizon Select Fund is expected to generate 1.87 times less return on investment than Value Fund. In addition to that, Select Fund is 1.86 times more volatile than Value Fund A. It trades about 0.1 of its total potential returns per unit of risk. Value Fund A is currently generating about 0.35 per unit of volatility. If you would invest 767.00 in Value Fund A on November 2, 2024 and sell it today you would earn a total of 37.00 from holding Value Fund A or generate 4.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Select Fund Investor vs. Value Fund A
Performance |
| Timeline |
| Select Fund Investor |
| Value Fund A |
Select Fund and Value Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Fund and Value Fund
The main advantage of trading using opposite Select Fund and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Fund position performs unexpectedly, Value Fund 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 Value Fund will offset losses from the drop in Value Fund'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 |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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