Correlation Between Capital Growth and Growth Fund
Can any of the company-specific risk be diversified away by investing in both Capital Growth 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 Capital Growth and Growth Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Growth Fund and Growth Fund Growth, you can compare the effects of market volatilities on Capital Growth 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 Capital Growth with a short position of Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Growth and Growth Fund.
Diversification Opportunities for Capital Growth and Growth Fund
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Growth is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Capital Growth Fund and Growth Fund Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund Growth and Capital Growth 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 Capital Growth Fund 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 Growth has no effect on the direction of Capital Growth i.e., Capital Growth and Growth Fund go up and down completely randomly.
Pair Corralation between Capital Growth and Growth Fund
Assuming the 90 days horizon Capital Growth is expected to generate 1.55 times less return on investment than Growth Fund. But when comparing it to its historical volatility, Capital Growth Fund is 1.46 times less risky than Growth Fund. It trades about 0.11 of its potential returns per unit of risk. Growth Fund Growth is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,186 in Growth Fund Growth on August 25, 2024 and sell it today you would earn a total of 1,015 from holding Growth Fund Growth or generate 31.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Growth Fund vs. Growth Fund Growth
Performance |
| Timeline |
| Capital Growth |
| Growth Fund Growth |
Capital Growth and Growth Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Growth and Growth Fund
The main advantage of trading using opposite Capital Growth and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Growth 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.| Capital Growth vs. Alpsalerian Energy Infrastructure | Capital Growth vs. Icon Natural Resources | Capital Growth vs. Firsthand Alternative Energy | Capital Growth vs. Tortoise Energy Independence |
| Growth Fund vs. Income Stock Fund | Growth Fund vs. Emerging Markets Fund | Growth Fund vs. International Fund International | Growth Fund vs. Small Cap 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance |