Correlation Between Income Fund and Capital Growth
Can any of the company-specific risk be diversified away by investing in both Income Fund and Capital 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 Capital 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 Capital Growth Fund, you can compare the effects of market volatilities on Income Fund and Capital 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 Capital Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and Capital Growth.
Diversification Opportunities for Income Fund and Capital Growth
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Income and Capital is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Income and Capital Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital 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 Capital Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Growth has no effect on the direction of Income Fund i.e., Income Fund and Capital Growth go up and down completely randomly.
Pair Corralation between Income Fund and Capital Growth
Assuming the 90 days horizon Income Fund is expected to generate 2.58 times less return on investment than Capital Growth. But when comparing it to its historical volatility, Income Fund Income is 2.27 times less risky than Capital Growth. It trades about 0.13 of its potential returns per unit of risk. Capital Growth Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,113 in Capital Growth Fund on September 1, 2024 and sell it today you would earn a total of 357.00 from holding Capital Growth Fund or generate 32.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Fund Income vs. Capital Growth Fund
Performance |
| Timeline |
| Income Fund Income |
| Capital Growth |
Income Fund and Capital Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Fund and Capital Growth
The main advantage of trading using opposite Income Fund and Capital Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund position performs unexpectedly, Capital 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 Capital Growth will offset losses from the drop in Capital Growth's long position.| Income Fund vs. T Rowe Price | Income Fund vs. Balanced Fund Investor | Income Fund vs. Fa 529 Aggressive | Income Fund vs. Volumetric Fund Volumetric |
| Capital Growth vs. International Fund International | Capital Growth vs. Emerging Markets Fund | Capital Growth vs. Science Technology Fund | Capital 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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