Correlation Between Aggressive Growth and Capital Growth
Can any of the company-specific risk be diversified away by investing in both Aggressive Growth 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 Aggressive Growth and Capital Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aggressive Growth Fund and Capital Growth Fund, you can compare the effects of market volatilities on Aggressive Growth 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 Aggressive Growth with a short position of Capital Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Growth and Capital Growth.
Diversification Opportunities for Aggressive Growth and Capital Growth
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aggressive and Capital is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Growth Fund and Capital Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Growth and Aggressive 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 Aggressive Growth Fund 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 Aggressive Growth i.e., Aggressive Growth and Capital Growth go up and down completely randomly.
Pair Corralation between Aggressive Growth and Capital Growth
Assuming the 90 days horizon Aggressive Growth Fund is expected to under-perform the Capital Growth. In addition to that, Aggressive Growth is 1.79 times more volatile than Capital Growth Fund. It trades about -0.2 of its total potential returns per unit of risk. Capital Growth Fund is currently generating about -0.08 per unit of volatility. If you would invest 1,303 in Capital Growth Fund on December 1, 2024 and sell it today you would lose (14.00) from holding Capital Growth Fund or give up 1.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aggressive Growth Fund vs. Capital Growth Fund
Performance |
| Timeline |
| Aggressive Growth |
| Capital Growth |
Aggressive Growth and Capital Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aggressive Growth and Capital Growth
The main advantage of trading using opposite Aggressive Growth and Capital Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aggressive Growth 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.| Aggressive Growth vs. Ashmore Emerging Markets | Aggressive Growth vs. Artisan Developing World | Aggressive Growth vs. Dws Emerging Markets | Aggressive Growth vs. Legg Mason Western |
| Capital Growth vs. Harbor Diversified International | Capital Growth vs. Lord Abbett Diversified | Capital Growth vs. American Century Diversified | Capital Growth vs. Principal Lifetime Hybrid |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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