Correlation Between Intermediate-term and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both Intermediate-term 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 Intermediate-term and Aggressive Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Term Bond Fund and Aggressive Growth Fund, you can compare the effects of market volatilities on Intermediate-term 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 Intermediate-term with a short position of Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Aggressive Growth.
Diversification Opportunities for Intermediate-term and Aggressive Growth
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Intermediate-term and Aggressive is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Bond 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 Intermediate-term 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 Intermediate Term Bond 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 Intermediate-term i.e., Intermediate-term and Aggressive Growth go up and down completely randomly.
Pair Corralation between Intermediate-term and Aggressive Growth
Assuming the 90 days horizon Intermediate-term is expected to generate 11.32 times less return on investment than Aggressive Growth. But when comparing it to its historical volatility, Intermediate Term Bond Fund is 3.69 times less risky than Aggressive Growth. It trades about 0.04 of its potential returns per unit of risk. Aggressive Growth Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 5,258 in Aggressive Growth Fund on August 25, 2024 and sell it today you would earn a total of 1,741 from holding Aggressive Growth Fund or generate 33.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Term Bond Fund vs. Aggressive Growth Fund
Performance |
| Timeline |
| Intermediate Term Bond |
| Aggressive Growth |
Intermediate-term and Aggressive Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate-term and Aggressive Growth
The main advantage of trading using opposite Intermediate-term and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate-term 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.| Intermediate-term vs. Income Fund Income | Intermediate-term vs. Usaa Nasdaq 100 | Intermediate-term vs. Usaa Intermediate Term | Intermediate-term vs. Usaa Tax Exempt |
| Aggressive Growth vs. International Fund International | Aggressive Growth vs. Small Cap Stock | Aggressive Growth vs. Income Stock Fund | Aggressive Growth vs. Emerging Markets 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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