Correlation Between Growth Fund and Blue Chip
Can any of the company-specific risk be diversified away by investing in both Growth Fund 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 Fund 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 Fund Growth and Blue Chip Growth, you can compare the effects of market volatilities on Growth Fund 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 Fund with a short position of Blue Chip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Blue Chip.
Diversification Opportunities for Growth Fund and Blue Chip
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Growth and Blue is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Growth 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 Fund 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 Fund Growth 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 Fund i.e., Growth Fund and Blue Chip go up and down completely randomly.
Pair Corralation between Growth Fund and Blue Chip
Assuming the 90 days horizon Growth Fund is expected to generate 1.13 times less return on investment than Blue Chip. In addition to that, Growth Fund is 1.07 times more volatile than Blue Chip Growth. It trades about 0.1 of its total potential returns per unit of risk. Blue Chip Growth is currently generating about 0.12 per unit of volatility. If you would invest 1,909 in Blue Chip Growth on August 27, 2024 and sell it today you would earn a total of 55.00 from holding Blue Chip Growth or generate 2.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Growth Fund Growth vs. Blue Chip Growth
Performance |
| Timeline |
| Growth Fund Growth |
| Blue Chip Growth |
Growth Fund and Blue Chip Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Blue Chip
The main advantage of trading using opposite Growth Fund and Blue Chip positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund 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 Fund vs. Mid Cap Index | Growth Fund vs. Mid Cap Strategic | Growth Fund vs. Valic Company I | Growth Fund vs. Stock Index Fund |
| Blue Chip vs. Mid Cap Index | Blue Chip vs. Mid Cap Strategic | Blue Chip vs. Valic Company I | Blue Chip vs. Stock Index 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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