Correlation Between Value Fund and Sustainable Equity
Can any of the company-specific risk be diversified away by investing in both Value 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 Value 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 Value Fund Investor and Sustainable Equity Fund, you can compare the effects of market volatilities on Value 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 Value Fund with a short position of Sustainable Equity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Sustainable Equity.
Diversification Opportunities for Value Fund and Sustainable Equity
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Value and Sustainable is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Investor and Sustainable Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sustainable Equity and Value 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 Value Fund Investor 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 Value Fund i.e., Value Fund and Sustainable Equity go up and down completely randomly.
Pair Corralation between Value Fund and Sustainable Equity
Assuming the 90 days horizon Value Fund is expected to generate 1.86 times less return on investment than Sustainable Equity. But when comparing it to its historical volatility, Value Fund Investor is 1.15 times less risky than Sustainable Equity. It trades about 0.08 of its potential returns per unit of risk. Sustainable Equity Fund is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 4,549 in Sustainable Equity Fund on September 3, 2024 and sell it today you would earn a total of 1,305 from holding Sustainable Equity Fund or generate 28.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund Investor vs. Sustainable Equity Fund
Performance |
| Timeline |
| Value Fund Investor |
| Sustainable Equity |
Value Fund and Sustainable Equity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Sustainable Equity
The main advantage of trading using opposite Value Fund and Sustainable Equity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value 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.| Value Fund vs. Dodge Cox Stock | Value Fund vs. American Funds American | Value Fund vs. American Funds American | Value Fund vs. American Mutual Fund |
| 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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