Correlation Between Global Growth and Strategic Allocation
Can any of the company-specific risk be diversified away by investing in both Global Growth and Strategic Allocation 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 Strategic Allocation 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 Strategic Allocation Moderate, you can compare the effects of market volatilities on Global Growth and Strategic Allocation 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 Strategic Allocation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Growth and Strategic Allocation.
Diversification Opportunities for Global Growth and Strategic Allocation
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Strategic is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Global Growth Fund and Strategic Allocation Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Allocation 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 Strategic Allocation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Allocation has no effect on the direction of Global Growth i.e., Global Growth and Strategic Allocation go up and down completely randomly.
Pair Corralation between Global Growth and Strategic Allocation
Assuming the 90 days horizon Global Growth is expected to generate 1.04 times less return on investment than Strategic Allocation. In addition to that, Global Growth is 1.82 times more volatile than Strategic Allocation Moderate. It trades about 0.06 of its total potential returns per unit of risk. Strategic Allocation Moderate is currently generating about 0.11 per unit of volatility. If you would invest 618.00 in Strategic Allocation Moderate on August 27, 2024 and sell it today you would earn a total of 64.00 from holding Strategic Allocation Moderate or generate 10.36% 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. Strategic Allocation Moderate
Performance |
| Timeline |
| Global Growth |
| Strategic Allocation |
Global Growth and Strategic Allocation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Growth and Strategic Allocation
The main advantage of trading using opposite Global Growth and Strategic Allocation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Growth position performs unexpectedly, Strategic Allocation 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 Strategic Allocation will offset losses from the drop in Strategic Allocation'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 |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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