Correlation Between Capital Growth and Target Managed
Can any of the company-specific risk be diversified away by investing in both Capital Growth and Target Managed 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 Target Managed 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 Target Managed Allocation, you can compare the effects of market volatilities on Capital Growth and Target Managed 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 Target Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Growth and Target Managed.
Diversification Opportunities for Capital Growth and Target Managed
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Capital and Target is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Capital Growth Fund and Target Managed Allocation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target Managed Allocation 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 Target Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target Managed Allocation has no effect on the direction of Capital Growth i.e., Capital Growth and Target Managed go up and down completely randomly.
Pair Corralation between Capital Growth and Target Managed
Assuming the 90 days horizon Capital Growth Fund is expected to generate 0.87 times more return on investment than Target Managed. However, Capital Growth Fund is 1.15 times less risky than Target Managed. It trades about 0.11 of its potential returns per unit of risk. Target Managed Allocation is currently generating about 0.08 per unit of risk. If you would invest 1,453 in Capital Growth Fund on August 27, 2024 and sell it today you would earn a total of 21.00 from holding Capital Growth Fund or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital Growth Fund vs. Target Managed Allocation
Performance |
| Timeline |
| Capital Growth |
| Target Managed Allocation |
Capital Growth and Target Managed Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Growth and Target Managed
The main advantage of trading using opposite Capital Growth and Target Managed positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Growth position performs unexpectedly, Target Managed 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 Target Managed will offset losses from the drop in Target Managed's long position.| Capital Growth vs. Emerging Markets Fund | Capital Growth vs. High Income Fund | Capital Growth vs. International Fund International | Capital Growth vs. Growth Income Fund |
| Target Managed vs. Capital Growth Fund | Target Managed vs. Emerging Markets Fund | Target Managed vs. High Income Fund | Target Managed 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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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