Correlation Between Aggressive Growth and World Growth
Can any of the company-specific risk be diversified away by investing in both Aggressive Growth and World 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 World 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 World Growth Fund, you can compare the effects of market volatilities on Aggressive Growth and World 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 World Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Growth and World Growth.
Diversification Opportunities for Aggressive Growth and World Growth
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Aggressive and World is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Growth Fund and World Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World 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 World Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Growth has no effect on the direction of Aggressive Growth i.e., Aggressive Growth and World Growth go up and down completely randomly.
Pair Corralation between Aggressive Growth and World Growth
Assuming the 90 days horizon Aggressive Growth Fund is expected to generate 1.5 times more return on investment than World Growth. However, Aggressive Growth is 1.5 times more volatile than World Growth Fund. It trades about 0.13 of its potential returns per unit of risk. World Growth Fund is currently generating about 0.11 per unit of risk. If you would invest 3,543 in Aggressive Growth Fund on September 13, 2024 and sell it today you would earn a total of 3,739 from holding Aggressive Growth Fund or generate 105.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aggressive Growth Fund vs. World Growth Fund
Performance |
| Timeline |
| Aggressive Growth |
| World Growth |
Aggressive Growth and World Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aggressive Growth and World Growth
The main advantage of trading using opposite Aggressive Growth and World Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aggressive Growth position performs unexpectedly, World 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 World Growth will offset losses from the drop in World Growth's long position.| Aggressive Growth vs. Jpmorgan Diversified Fund | Aggressive Growth vs. Western Asset Diversified | Aggressive Growth vs. Fulcrum Diversified Absolute | Aggressive Growth vs. Global Diversified Income |
| World Growth vs. International Fund International | World Growth vs. Emerging Markets Fund | World Growth vs. Science Technology Fund | World 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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