Correlation Between World Growth and Income Fund
Can any of the company-specific risk be diversified away by investing in both World Growth and Income 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 World Growth and Income Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Growth Fund and Income Fund Income, you can compare the effects of market volatilities on World Growth and Income 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 World Growth with a short position of Income Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Growth and Income Fund.
Diversification Opportunities for World Growth and Income Fund
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between World and Income is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding World Growth Fund and Income Fund Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund Income and World Growth 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 World Growth Fund are associated (or correlated) with Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund Income has no effect on the direction of World Growth i.e., World Growth and Income Fund go up and down completely randomly.
Pair Corralation between World Growth and Income Fund
Assuming the 90 days horizon World Growth Fund is expected to generate 1.99 times more return on investment than Income Fund. However, World Growth is 1.99 times more volatile than Income Fund Income. It trades about 0.09 of its potential returns per unit of risk. Income Fund Income is currently generating about 0.05 per unit of risk. If you would invest 3,193 in World Growth Fund on August 28, 2024 and sell it today you would earn a total of 41.00 from holding World Growth Fund or generate 1.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Growth Fund vs. Income Fund Income
Performance |
| Timeline |
| World Growth |
| Income Fund Income |
World Growth and Income Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Growth and Income Fund
The main advantage of trading using opposite World Growth and Income Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Growth position performs unexpectedly, Income 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 Income Fund will offset losses from the drop in Income Fund's long position.| World Growth vs. Emerging Markets Fund | World Growth vs. High Income Fund | World Growth vs. International Fund International | World Growth vs. Growth Income Fund |
| Income Fund vs. Capital Growth Fund | Income Fund vs. Emerging Markets Fund | Income Fund vs. High Income Fund | Income Fund vs. International Fund International |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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