Correlation Between Income Fund and World Growth
Can any of the company-specific risk be diversified away by investing in both Income 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 Income 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 Income Fund Income and World Growth Fund, you can compare the effects of market volatilities on Income 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 Income Fund with a short position of World Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and World Growth.
Diversification Opportunities for Income Fund and World Growth
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Income and World is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Income and World Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Growth and Income 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 Income Fund Income 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 Income Fund i.e., Income Fund and World Growth go up and down completely randomly.
Pair Corralation between Income Fund and World Growth
Assuming the 90 days horizon Income Fund Income is expected to under-perform the World Growth. But the mutual fund apears to be less risky and, when comparing its historical volatility, Income Fund Income is 2.45 times less risky than World Growth. The mutual fund trades about -0.25 of its potential returns per unit of risk. The World Growth Fund is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,191 in World Growth Fund on August 25, 2024 and sell it today you would earn a total of 19.00 from holding World Growth Fund or generate 0.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Fund Income vs. World Growth Fund
Performance |
| Timeline |
| Income Fund Income |
| World Growth |
Income Fund and World Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Fund and World Growth
The main advantage of trading using opposite Income Fund and World Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income 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.| Income Fund vs. Leggmason Partners Institutional | Income Fund vs. Scharf Global Opportunity | Income Fund vs. Acm Dynamic Opportunity | Income Fund vs. Iaadx |
| World Growth vs. International Fund International | World Growth vs. Emerging Markets Fund | World Growth vs. Science Technology Fund | World Growth vs. Aggressive Growth 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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