Correlation Between Income Stock and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both Income Stock and Aggressive 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 Income Stock and Aggressive Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Stock Fund and Aggressive Growth Fund, you can compare the effects of market volatilities on Income Stock and Aggressive 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 Income Stock with a short position of Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Stock and Aggressive Growth.
Diversification Opportunities for Income Stock and Aggressive Growth
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Income and Aggressive is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Income Stock Fund and Aggressive Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth and Income Stock 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 Income Stock Fund are associated (or correlated) with Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Income Stock i.e., Income Stock and Aggressive Growth go up and down completely randomly.
Pair Corralation between Income Stock and Aggressive Growth
Assuming the 90 days horizon Income Stock Fund is expected to generate 0.63 times more return on investment than Aggressive Growth. However, Income Stock Fund is 1.58 times less risky than Aggressive Growth. It trades about 0.3 of its potential returns per unit of risk. Aggressive Growth Fund is currently generating about 0.1 per unit of risk. If you would invest 2,087 in Income Stock Fund on August 31, 2024 and sell it today you would earn a total of 108.00 from holding Income Stock Fund or generate 5.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Stock Fund vs. Aggressive Growth Fund
Performance |
| Timeline |
| Income Stock |
| Aggressive Growth |
Income Stock and Aggressive Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Stock and Aggressive Growth
The main advantage of trading using opposite Income Stock and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Stock position performs unexpectedly, Aggressive 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.| Income Stock vs. Growth Opportunities Fund | Income Stock vs. Ab Value Fund | Income Stock vs. T Rowe Price | Income Stock vs. Omni Small Cap Value |
| Aggressive Growth vs. Mirova Global Green | Aggressive Growth vs. Morgan Stanley Global | Aggressive Growth vs. Federated Global Allocation | Aggressive Growth vs. T Rowe Price |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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