Correlation Between International Growth and Disciplined Growth
Can any of the company-specific risk be diversified away by investing in both International Growth and Disciplined 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 International Growth and Disciplined Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Growth Fund and Disciplined Growth Fund, you can compare the effects of market volatilities on International Growth and Disciplined 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 International Growth with a short position of Disciplined Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Growth and Disciplined Growth.
Diversification Opportunities for International Growth and Disciplined Growth
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between International and Disciplined is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding International Growth Fund and Disciplined Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Disciplined Growth and International Growth 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 International Growth Fund are associated (or correlated) with Disciplined Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Disciplined Growth has no effect on the direction of International Growth i.e., International Growth and Disciplined Growth go up and down completely randomly.
Pair Corralation between International Growth and Disciplined Growth
Assuming the 90 days horizon International Growth is expected to generate 8.97 times less return on investment than Disciplined Growth. But when comparing it to its historical volatility, International Growth Fund is 1.18 times less risky than Disciplined Growth. It trades about 0.01 of its potential returns per unit of risk. Disciplined Growth Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,631 in Disciplined Growth Fund on September 1, 2024 and sell it today you would earn a total of 524.00 from holding Disciplined Growth Fund or generate 19.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Growth Fund vs. Disciplined Growth Fund
Performance |
| Timeline |
| International Growth |
| Disciplined Growth |
International Growth and Disciplined Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Growth and Disciplined Growth
The main advantage of trading using opposite International Growth and Disciplined Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Growth position performs unexpectedly, Disciplined 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 Disciplined Growth will offset losses from the drop in Disciplined Growth's long position.| International Growth vs. Mid Cap Value | International Growth vs. Equity Growth Fund | International Growth vs. Income Growth Fund | International Growth vs. Diversified Bond Fund |
| Disciplined Growth vs. Growth Fund Investor | Disciplined Growth vs. Ultra Fund Investor | Disciplined Growth vs. Heritage Fund Investor | Disciplined Growth vs. International Growth Fund |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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