Correlation Between Growth Income and Small Company
Can any of the company-specific risk be diversified away by investing in both Growth Income and Small Company 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 Growth Income and Small Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Income Fund and Small Pany Growth, you can compare the effects of market volatilities on Growth Income and Small Company 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 Growth Income with a short position of Small Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Income and Small Company.
Diversification Opportunities for Growth Income and Small Company
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Growth and Small is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Growth Income Fund and Small Pany Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Pany Growth and Growth Income 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 Growth Income Fund are associated (or correlated) with Small Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Pany Growth has no effect on the direction of Growth Income i.e., Growth Income and Small Company go up and down completely randomly.
Pair Corralation between Growth Income and Small Company
Assuming the 90 days horizon Growth Income is expected to generate 6.21 times less return on investment than Small Company. But when comparing it to its historical volatility, Growth Income Fund is 2.69 times less risky than Small Company. It trades about 0.17 of its potential returns per unit of risk. Small Pany Growth is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 1,254 in Small Pany Growth on August 24, 2024 and sell it today you would earn a total of 245.00 from holding Small Pany Growth or generate 19.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Income Fund vs. Small Pany Growth
Performance |
| Timeline |
| Growth Income |
| Small Pany Growth |
Growth Income and Small Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Income and Small Company
The main advantage of trading using opposite Growth Income and Small Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Income position performs unexpectedly, Small Company 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 Small Company will offset losses from the drop in Small Company's long position.| Growth Income vs. Vanguard Small Cap Index | Growth Income vs. Vanguard Mid Cap Index | Growth Income vs. ABIVAX Socit Anonyme | Growth Income vs. SCOR PK |
| Small Company vs. Mid Cap Growth | Small Company vs. Growth Portfolio Class | Small Company vs. Morgan Stanley Multi | Small Company vs. Emerging Markets Portfolio |
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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