Correlation Between Global Growth and Equity Growth
Can any of the company-specific risk be diversified away by investing in both Global Growth and Equity 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 Global Growth and Equity Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Growth Fund and Equity Growth Fund, you can compare the effects of market volatilities on Global Growth and Equity 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 Global Growth with a short position of Equity Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Growth and Equity Growth.
Diversification Opportunities for Global Growth and Equity Growth
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Equity is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Global Growth Fund and Equity Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Growth and Global 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 Global Growth Fund are associated (or correlated) with Equity Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Growth has no effect on the direction of Global Growth i.e., Global Growth and Equity Growth go up and down completely randomly.
Pair Corralation between Global Growth and Equity Growth
Assuming the 90 days horizon Global Growth is expected to generate 2.44 times less return on investment than Equity Growth. In addition to that, Global Growth is 1.21 times more volatile than Equity Growth Fund. It trades about 0.04 of its total potential returns per unit of risk. Equity Growth Fund is currently generating about 0.11 per unit of volatility. If you would invest 2,232 in Equity Growth Fund on August 27, 2024 and sell it today you would earn a total of 1,177 from holding Equity Growth Fund or generate 52.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Growth Fund vs. Equity Growth Fund
Performance |
| Timeline |
| Global Growth |
| Equity Growth |
Global Growth and Equity Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Growth and Equity Growth
The main advantage of trading using opposite Global Growth and Equity Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Growth position performs unexpectedly, Equity 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 Equity Growth will offset losses from the drop in Equity Growth's long position.| Global Growth vs. Emerging Markets Fund | Global Growth vs. International Growth Fund | Global Growth vs. Heritage Fund Investor | Global Growth vs. Select Fund Investor |
| Equity Growth vs. Mid Cap Value | Equity Growth vs. Income Growth Fund | Equity Growth vs. Diversified Bond Fund | Equity Growth vs. Emerging Markets 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 Stocks Directory module to find actively traded stocks across global markets.
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