Correlation Between Growth Fund and World Growth
Can any of the company-specific risk be diversified away by investing in both Growth Fund and World Growth 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 Fund and World Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund Growth and World Growth Fund, you can compare the effects of market volatilities on Growth Fund and World Growth 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 Fund with a short position of World Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and World Growth.
Diversification Opportunities for Growth Fund and World Growth
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Growth and World is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Growth and World Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Growth and Growth Fund 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 Fund Growth are associated (or correlated) with World Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Growth has no effect on the direction of Growth Fund i.e., Growth Fund and World Growth go up and down completely randomly.
Pair Corralation between Growth Fund and World Growth
Assuming the 90 days horizon Growth Fund Growth is expected to generate 1.65 times more return on investment than World Growth. However, Growth Fund is 1.65 times more volatile than World Growth Fund. It trades about 0.16 of its potential returns per unit of risk. World Growth Fund is currently generating about 0.09 per unit of risk. If you would invest 4,035 in Growth Fund Growth on August 28, 2024 and sell it today you would earn a total of 155.00 from holding Growth Fund Growth or generate 3.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Growth vs. World Growth Fund
Performance |
| Timeline |
| Growth Fund Growth |
| World Growth |
Growth Fund and World Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and World Growth
The main advantage of trading using opposite Growth Fund and World Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, World Growth 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 World Growth will offset losses from the drop in World Growth's long position.| Growth Fund vs. Income Stock Fund | Growth Fund vs. Emerging Markets Fund | Growth Fund vs. International Fund International | Growth Fund vs. Small Cap Stock |
| World Growth vs. Emerging Markets Fund | World Growth vs. High Income Fund | World Growth vs. International Fund International | World Growth vs. Growth Income Fund |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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