Correlation Between Intermediate Term and Income Growth
Can any of the company-specific risk be diversified away by investing in both Intermediate Term and Income 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 Intermediate Term and Income Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Term Tax Free Bond and Income Growth Fund, you can compare the effects of market volatilities on Intermediate Term and Income 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 Intermediate Term with a short position of Income Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate Term and Income Growth.
Diversification Opportunities for Intermediate Term and Income Growth
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Intermediate and Income is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Tax Free Bon and Income Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Growth and Intermediate Term 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 Intermediate Term Tax Free Bond are associated (or correlated) with Income Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Growth has no effect on the direction of Intermediate Term i.e., Intermediate Term and Income Growth go up and down completely randomly.
Pair Corralation between Intermediate Term and Income Growth
Assuming the 90 days horizon Intermediate Term is expected to generate 7.31 times less return on investment than Income Growth. But when comparing it to its historical volatility, Intermediate Term Tax Free Bond is 3.22 times less risky than Income Growth. It trades about 0.12 of its potential returns per unit of risk. Income Growth Fund is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 3,736 in Income Growth Fund on August 29, 2024 and sell it today you would earn a total of 181.00 from holding Income Growth Fund or generate 4.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Term Tax Free Bon vs. Income Growth Fund
Performance |
| Timeline |
| Intermediate Term Tax |
| Income Growth |
Intermediate Term and Income Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate Term and Income Growth
The main advantage of trading using opposite Intermediate Term and Income Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate Term position performs unexpectedly, Income 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 Income Growth will offset losses from the drop in Income Growth's long position.| Intermediate Term vs. Mid Cap Value | Intermediate Term vs. Equity Growth Fund | Intermediate Term vs. Income Growth Fund | Intermediate Term vs. Diversified Bond Fund |
| Income Growth vs. International Growth Fund | Income Growth vs. Growth Fund Investor | Income Growth vs. Ultra Fund Investor | Income Growth vs. Strategic Allocation Aggressive |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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