Correlation Between Income Stock and Growth Fund
Can any of the company-specific risk be diversified away by investing in both Income Stock and Growth Fund 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 Fund 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 Fund Growth, you can compare the effects of market volatilities on Income Stock and Growth Fund 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 Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Stock and Growth Fund.
Diversification Opportunities for Income Stock and Growth Fund
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Income and Growth is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Income Stock Fund and Growth Fund Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund 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 Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund Growth has no effect on the direction of Income Stock i.e., Income Stock and Growth Fund go up and down completely randomly.
Pair Corralation between Income Stock and Growth Fund
Assuming the 90 days horizon Income Stock is expected to generate 1.51 times less return on investment than Growth Fund. But when comparing it to its historical volatility, Income Stock Fund is 1.6 times less risky than Growth Fund. It trades about 0.12 of its potential returns per unit of risk. Growth Fund Growth is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 3,186 in Growth Fund Growth on August 25, 2024 and sell it today you would earn a total of 1,015 from holding Growth Fund Growth or generate 31.86% 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. Growth Fund Growth
Performance |
| Timeline |
| Income Stock |
| Growth Fund Growth |
Income Stock and Growth Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Stock and Growth Fund
The main advantage of trading using opposite Income Stock and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Stock position performs unexpectedly, Growth Fund 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 Fund will offset losses from the drop in Growth Fund's long position.| Income Stock vs. Transamerica Financial Life | Income Stock vs. Gabelli Global Financial | Income Stock vs. John Hancock Financial | Income Stock vs. Mesirow Financial Small |
| Growth Fund vs. Income Stock Fund | Growth Fund vs. Emerging Markets Fund | Growth Fund vs. International Fund International | Growth Fund vs. Small Cap Stock |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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