Correlation Between Growth Fund and Sustainable Equity
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Sustainable Equity 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 Growth Fund and Sustainable Equity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund I and Sustainable Equity Fund, you can compare the effects of market volatilities on Growth Fund and Sustainable Equity 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 Growth Fund with a short position of Sustainable Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Sustainable Equity.
Diversification Opportunities for Growth Fund and Sustainable Equity
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Sustainable is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund I and Sustainable Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sustainable Equity and Growth 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 Growth Fund I are associated (or correlated) with Sustainable Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sustainable Equity has no effect on the direction of Growth Fund i.e., Growth Fund and Sustainable Equity go up and down completely randomly.
Pair Corralation between Growth Fund and Sustainable Equity
Assuming the 90 days horizon Growth Fund is expected to generate 1.11 times less return on investment than Sustainable Equity. In addition to that, Growth Fund is 1.35 times more volatile than Sustainable Equity Fund. It trades about 0.06 of its total potential returns per unit of risk. Sustainable Equity Fund is currently generating about 0.09 per unit of volatility. If you would invest 5,317 in Sustainable Equity Fund on September 3, 2024 and sell it today you would earn a total of 537.00 from holding Sustainable Equity Fund or generate 10.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund I vs. Sustainable Equity Fund
Performance |
| Timeline |
| Growth Fund I |
| Sustainable Equity |
Growth Fund and Sustainable Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Sustainable Equity
The main advantage of trading using opposite Growth Fund and Sustainable Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Sustainable Equity 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 Sustainable Equity will offset losses from the drop in Sustainable Equity's long position.| Growth Fund vs. New Perspective Fund | Growth Fund vs. Investment Of America | Growth Fund vs. Virtus Emerging Markets | Growth Fund vs. Oak Ridge Small |
| Sustainable Equity vs. Vanguard Total Stock | Sustainable Equity vs. Vanguard 500 Index | Sustainable Equity vs. Vanguard Total Stock | Sustainable Equity vs. Vanguard Total Stock |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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