Correlation Between Growth Income and Blue Chip
Can any of the company-specific risk be diversified away by investing in both Growth Income and Blue Chip 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 Growth Income and Blue Chip into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Income Fund and Blue Chip Growth, you can compare the effects of market volatilities on Growth Income and Blue Chip 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 Growth Income with a short position of Blue Chip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Income and Blue Chip.
Diversification Opportunities for Growth Income and Blue Chip
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Growth and Blue is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Growth Income Fund and Blue Chip Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Chip Growth and Growth Income 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 Growth Income Fund are associated (or correlated) with Blue Chip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Chip Growth has no effect on the direction of Growth Income i.e., Growth Income and Blue Chip go up and down completely randomly.
Pair Corralation between Growth Income and Blue Chip
Assuming the 90 days horizon Growth Income Fund is expected to generate 0.57 times more return on investment than Blue Chip. However, Growth Income Fund is 1.76 times less risky than Blue Chip. It trades about 0.24 of its potential returns per unit of risk. Blue Chip Growth is currently generating about 0.09 per unit of risk. If you would invest 3,394 in Growth Income Fund on November 2, 2024 and sell it today you would earn a total of 129.00 from holding Growth Income Fund or generate 3.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.0% |
| Values | Daily Returns |
Growth Income Fund vs. Blue Chip Growth
Performance |
| Timeline |
| Growth Income |
| Blue Chip Growth |
Growth Income and Blue Chip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Income and Blue Chip
The main advantage of trading using opposite Growth Income and Blue Chip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Income position performs unexpectedly, Blue Chip 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 Blue Chip will offset losses from the drop in Blue Chip's long position.| Growth Income vs. Credit Suisse Multialternative | Growth Income vs. Cref Inflation Linked Bond | Growth Income vs. Ab Bond Inflation | Growth Income vs. Guidepath Managed Futures |
| Blue Chip vs. Mid Cap Index | Blue Chip vs. Mid Cap Strategic | Blue Chip vs. Valic Company I | Blue Chip vs. Valic Company I |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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