Correlation Between Income Stock and Growth Income
Can any of the company-specific risk be diversified away by investing in both Income Stock and Growth Income 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 Growth Income 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 Growth Income Fund, you can compare the effects of market volatilities on Income Stock and Growth Income 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 Growth Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Stock and Growth Income.
Diversification Opportunities for Income Stock and Growth Income
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and Growth is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Income Stock Fund and Growth Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Income 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 Growth Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Income has no effect on the direction of Income Stock i.e., Income Stock and Growth Income go up and down completely randomly.
Pair Corralation between Income Stock and Growth Income
Assuming the 90 days horizon Income Stock is expected to generate 1.09 times less return on investment than Growth Income. But when comparing it to its historical volatility, Income Stock Fund is 1.04 times less risky than Growth Income. It trades about 0.13 of its potential returns per unit of risk. Growth Income Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,366 in Growth Income Fund on August 28, 2024 and sell it today you would earn a total of 542.00 from holding Growth Income Fund or generate 22.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Stock Fund vs. Growth Income Fund
Performance |
| Timeline |
| Income Stock |
| Growth Income |
Income Stock and Growth Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Stock and Growth Income
The main advantage of trading using opposite Income Stock and Growth Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Stock position performs unexpectedly, Growth Income 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 Growth Income will offset losses from the drop in Growth Income's long position.| Income Stock vs. Capital Growth Fund | Income Stock vs. Emerging Markets Fund | Income Stock vs. High Income Fund | Income Stock vs. International Fund International |
| Growth Income vs. Archer Balanced Fund | Growth Income vs. Semiconductor Ultrasector Profund | Growth Income vs. Balanced Fund Investor | Growth Income vs. Omni Small Cap Value |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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