Correlation Between Target Retirement and Growth Income
Can any of the company-specific risk be diversified away by investing in both Target Retirement and Growth Income 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 Target Retirement and Growth Income into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Retirement 2050 and Growth Income Fund, you can compare the effects of market volatilities on Target Retirement and Growth Income 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 Target Retirement with a short position of Growth Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Retirement and Growth Income.
Diversification Opportunities for Target Retirement and Growth Income
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Target and Growth is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Target Retirement 2050 and Growth Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Income and Target Retirement 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 Target Retirement 2050 are associated (or correlated) with Growth Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Income has no effect on the direction of Target Retirement i.e., Target Retirement and Growth Income go up and down completely randomly.
Pair Corralation between Target Retirement and Growth Income
Assuming the 90 days horizon Target Retirement is expected to generate 1.07 times less return on investment than Growth Income. But when comparing it to its historical volatility, Target Retirement 2050 is 1.18 times less risky than Growth Income. It trades about 0.3 of its potential returns per unit of risk. Growth Income Fund is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 2,351 in Growth Income Fund on November 2, 2024 and sell it today you would earn a total of 94.00 from holding Growth Income Fund or generate 4.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target Retirement 2050 vs. Growth Income Fund
Performance |
| Timeline |
| Target Retirement 2050 |
| Growth Income |
Target Retirement and Growth Income Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Retirement and Growth Income
The main advantage of trading using opposite Target Retirement and Growth Income positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Retirement position performs unexpectedly, Growth Income 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 Income will offset losses from the drop in Growth Income's long position.| Target Retirement vs. Locorr Market Trend | Target Retirement vs. Dreyfus Bond Market | Target Retirement vs. Prudential Emerging Markets | Target Retirement vs. Ab All Market |
| Growth Income vs. Invesco Energy Fund | Growth Income vs. Virtus Select Mlp | Growth Income vs. World Energy Fund | Growth Income vs. Environment And Alternative |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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