Correlation Between Science Technology and World Growth
Can any of the company-specific risk be diversified away by investing in both Science Technology 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 Science Technology and World Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Science Technology Fund and World Growth Fund, you can compare the effects of market volatilities on Science Technology 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 Science Technology with a short position of World Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Technology and World Growth.
Diversification Opportunities for Science Technology and World Growth
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Science and World is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Science Technology 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 Science Technology 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 Science Technology 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 Science Technology i.e., Science Technology and World Growth go up and down completely randomly.
Pair Corralation between Science Technology and World Growth
Assuming the 90 days horizon Science Technology Fund is expected to generate 1.71 times more return on investment than World Growth. However, Science Technology is 1.71 times more volatile than World Growth Fund. It trades about 0.1 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 1,723 in Science Technology Fund on September 13, 2024 and sell it today you would earn a total of 1,474 from holding Science Technology Fund or generate 85.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Science Technology Fund vs. World Growth Fund
Performance |
| Timeline |
| Science Technology |
| World Growth |
Science Technology and World Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Science Technology and World Growth
The main advantage of trading using opposite Science Technology and World Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Technology 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.| Science Technology vs. Aggressive Growth Fund | Science Technology vs. Sp 500 Index | Science Technology vs. Nasdaq 100 Index Fund | Science Technology vs. International Fund International |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |