Correlation Between Growth Fund and Heritage Fund
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Heritage 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 Growth Fund and Heritage Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund C and Heritage Fund A, you can compare the effects of market volatilities on Growth Fund and Heritage 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 Growth Fund with a short position of Heritage Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Heritage Fund.
Diversification Opportunities for Growth Fund and Heritage Fund
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Growth and Heritage is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund C and Heritage Fund A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Fund A 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 C are associated (or correlated) with Heritage Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Fund A has no effect on the direction of Growth Fund i.e., Growth Fund and Heritage Fund go up and down completely randomly.
Pair Corralation between Growth Fund and Heritage Fund
Assuming the 90 days horizon Growth Fund C is expected to generate 1.0 times more return on investment than Heritage Fund. However, Growth Fund is 1.0 times more volatile than Heritage Fund A. It trades about 0.1 of its potential returns per unit of risk. Heritage Fund A is currently generating about 0.09 per unit of risk. If you would invest 3,009 in Growth Fund C on August 26, 2024 and sell it today you would earn a total of 1,979 from holding Growth Fund C or generate 65.77% 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 C vs. Heritage Fund A
Performance |
| Timeline |
| Growth Fund C |
| Heritage Fund A |
Growth Fund and Heritage Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Heritage Fund
The main advantage of trading using opposite Growth Fund and Heritage Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Heritage 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 Heritage Fund will offset losses from the drop in Heritage Fund's long position.| Growth Fund vs. International Growth Fund | Growth Fund vs. Heritage Fund Investor | Growth Fund vs. Janus Global Research |
| Heritage Fund vs. Growth Fund Investor | Heritage Fund vs. Select Fund Investor | Heritage Fund vs. Emerging Markets Fund | Heritage Fund vs. Ultra 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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