Correlation Between Capital Growth and Value Fund
Can any of the company-specific risk be diversified away by investing in both Capital Growth and Value 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 Value 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 Value Fund Value, you can compare the effects of market volatilities on Capital Growth and Value 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 Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Growth and Value Fund.
Diversification Opportunities for Capital Growth and Value Fund
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Capital and Value is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Capital Growth Fund and Value Fund Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund Value 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 Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Value has no effect on the direction of Capital Growth i.e., Capital Growth and Value Fund go up and down completely randomly.
Pair Corralation between Capital Growth and Value Fund
Assuming the 90 days horizon Capital Growth is expected to generate 3.21 times less return on investment than Value Fund. But when comparing it to its historical volatility, Capital Growth Fund is 1.35 times less risky than Value Fund. It trades about 0.11 of its potential returns per unit of risk. Value Fund Value is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 2,140 in Value Fund Value on August 29, 2024 and sell it today you would earn a total of 107.00 from holding Value Fund Value or generate 5.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Growth Fund vs. Value Fund Value
Performance |
| Timeline |
| Capital Growth |
| Value Fund Value |
Capital Growth and Value Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Growth and Value Fund
The main advantage of trading using opposite Capital Growth and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Growth position performs unexpectedly, Value 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 Value Fund will offset losses from the drop in Value Fund's long position.| Capital Growth vs. Global Gold Fund | Capital Growth vs. The Gold Bullion | Capital Growth vs. James Balanced Golden | Capital Growth vs. Gamco Natural Resources |
| Value Fund vs. Capital Growth Fund | Value Fund vs. Emerging Markets Fund | Value Fund vs. High Income Fund | Value Fund vs. International Fund International |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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