Correlation Between Equity Income and Select Fund
Can any of the company-specific risk be diversified away by investing in both Equity Income and Select 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 Equity Income and Select Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Income Fund and Select Fund Investor, you can compare the effects of market volatilities on Equity Income and Select 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 Equity Income with a short position of Select Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Income and Select Fund.
Diversification Opportunities for Equity Income and Select Fund
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equity and Select is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Equity Income Fund and Select Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Fund Investor and Equity Income 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 Equity Income Fund are associated (or correlated) with Select Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Fund Investor has no effect on the direction of Equity Income i.e., Equity Income and Select Fund go up and down completely randomly.
Pair Corralation between Equity Income and Select Fund
Assuming the 90 days horizon Equity Income is expected to generate 4.03 times less return on investment than Select Fund. But when comparing it to its historical volatility, Equity Income Fund is 1.81 times less risky than Select Fund. It trades about 0.05 of its potential returns per unit of risk. Select Fund Investor is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 7,505 in Select Fund Investor on August 26, 2024 and sell it today you would earn a total of 4,940 from holding Select Fund Investor or generate 65.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equity Income Fund vs. Select Fund Investor
Performance |
| Timeline |
| Equity Income |
| Select Fund Investor |
Equity Income and Select Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equity Income and Select Fund
The main advantage of trading using opposite Equity Income and Select Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Income position performs unexpectedly, Select 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 Select Fund will offset losses from the drop in Select Fund's long position.| Equity Income vs. International Growth Fund | Equity Income vs. Growth Fund Investor | Equity Income vs. Ultra Fund Investor | Equity Income vs. Strategic Allocation Aggressive |
| Select Fund vs. International Growth Fund | Select Fund vs. Heritage Fund Investor | Select Fund vs. Janus Global Research |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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