Correlation Between Blue Chip and Value Fund
Can any of the company-specific risk be diversified away by investing in both Blue Chip and Value 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 Blue Chip and Value Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Chip Growth and Value Fund Value, you can compare the effects of market volatilities on Blue Chip and Value 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 Blue Chip with a short position of Value Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Chip and Value Fund.
Diversification Opportunities for Blue Chip and Value Fund
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Blue and Value is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Blue Chip Growth and Value Fund Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Fund Value and Blue Chip 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 Blue Chip Growth are associated (or correlated) with Value Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Fund Value has no effect on the direction of Blue Chip i.e., Blue Chip and Value Fund go up and down completely randomly.
Pair Corralation between Blue Chip and Value Fund
Assuming the 90 days horizon Blue Chip Growth is expected to generate 1.3 times more return on investment than Value Fund. However, Blue Chip is 1.3 times more volatile than Value Fund Value. It trades about 0.3 of its potential returns per unit of risk. Value Fund Value is currently generating about 0.36 per unit of risk. If you would invest 1,865 in Blue Chip Growth on September 1, 2024 and sell it today you would earn a total of 118.00 from holding Blue Chip Growth or generate 6.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Blue Chip Growth vs. Value Fund Value
Performance |
| Timeline |
| Blue Chip Growth |
| Value Fund Value |
Blue Chip and Value Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Chip and Value Fund
The main advantage of trading using opposite Blue Chip and Value Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Chip position performs unexpectedly, Value 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 Value Fund will offset losses from the drop in Value Fund's long position.| Blue Chip vs. Mid Cap Index | Blue Chip vs. Mid Cap Strategic | Blue Chip vs. Valic Company I | Blue Chip vs. Valic Company I |
| Value Fund vs. Homestead Intermediate Bond | Value Fund vs. Short Term Bond Fund | Value Fund vs. Short Term Government Securities | Value Fund vs. Homestead Rural America |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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