Correlation Between Capital Growth and Short Term
Can any of the company-specific risk be diversified away by investing in both Capital Growth and Short Term 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 Short Term 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 Short Term Bond Fund, you can compare the effects of market volatilities on Capital Growth and Short Term 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 Short Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Growth and Short Term.
Diversification Opportunities for Capital Growth and Short Term
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Capital and Short is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Capital Growth Fund and Short Term Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Bond 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 Short Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Bond has no effect on the direction of Capital Growth i.e., Capital Growth and Short Term go up and down completely randomly.
Pair Corralation between Capital Growth and Short Term
Assuming the 90 days horizon Capital Growth Fund is expected to generate 6.58 times more return on investment than Short Term. However, Capital Growth is 6.58 times more volatile than Short Term Bond Fund. It trades about 0.27 of its potential returns per unit of risk. Short Term Bond Fund is currently generating about 0.12 per unit of risk. If you would invest 1,436 in Capital Growth Fund on September 3, 2024 and sell it today you would earn a total of 48.00 from holding Capital Growth Fund or generate 3.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Growth Fund vs. Short Term Bond Fund
Performance |
| Timeline |
| Capital Growth |
| Short Term Bond |
Capital Growth and Short Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Growth and Short Term
The main advantage of trading using opposite Capital Growth and Short Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Growth position performs unexpectedly, Short Term 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 Short Term will offset losses from the drop in Short Term's long position.| Capital Growth vs. Cref Inflation Linked Bond | Capital Growth vs. Arrow Managed Futures | Capital Growth vs. Asg Managed Futures | Capital Growth vs. Ab Bond Inflation |
| Short Term vs. Adams Diversified Equity | Short Term vs. Jhancock Diversified Macro | Short Term vs. Oppenheimer International Diversified | Short Term vs. Evaluator Conservative Rms |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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