Correlation Between Value Fund and Growth Fund
Can any of the company-specific risk be diversified away by investing in both Value Fund and Growth 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 Value Fund and Growth Fund 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 Growth Fund C, you can compare the effects of market volatilities on Value Fund and Growth 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 Value Fund with a short position of Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Value Fund and Growth Fund.
Diversification Opportunities for Value Fund and Growth Fund
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Value and Growth is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund Investor and Growth Fund C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund C 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 Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund C has no effect on the direction of Value Fund i.e., Value Fund and Growth Fund go up and down completely randomly.
Pair Corralation between Value Fund and Growth Fund
Assuming the 90 days horizon Value Fund Investor is expected to generate 0.59 times more return on investment than Growth Fund. However, Value Fund Investor is 1.69 times less risky than Growth Fund. It trades about 0.11 of its potential returns per unit of risk. Growth Fund C is currently generating about 0.06 per unit of risk. If you would invest 781.00 in Value Fund Investor on August 27, 2024 and sell it today you would earn a total of 104.00 from holding Value Fund Investor or generate 13.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Value Fund Investor vs. Growth Fund C
Performance |
| Timeline |
| Value Fund Investor |
| Growth Fund C |
Value Fund and Growth Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Value Fund and Growth Fund
The main advantage of trading using opposite Value Fund and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund position performs unexpectedly, Growth 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 Growth Fund will offset losses from the drop in Growth Fund's long position.| Value Fund vs. International Growth Fund | Value Fund vs. Growth Fund Investor | Value Fund vs. Ultra Fund Investor | Value Fund vs. Strategic Allocation Aggressive |
| Growth Fund vs. International Growth Fund | Growth Fund vs. Heritage Fund Investor | Growth Fund vs. Janus Global Research |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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