Correlation Between Equity Growth and Core Plus
Can any of the company-specific risk be diversified away by investing in both Equity Growth and Core Plus 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 Equity Growth and Core Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equity Growth Fund and Core Plus Fund, you can compare the effects of market volatilities on Equity Growth and Core Plus 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 Equity Growth with a short position of Core Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Core Plus.
Diversification Opportunities for Equity Growth and Core Plus
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Equity and Core is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and Core Plus Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Plus Fund and Equity 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 Equity Growth Fund are associated (or correlated) with Core Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Plus Fund has no effect on the direction of Equity Growth i.e., Equity Growth and Core Plus go up and down completely randomly.
Pair Corralation between Equity Growth and Core Plus
Assuming the 90 days horizon Equity Growth Fund is expected to generate 100.76 times more return on investment than Core Plus. However, Equity Growth is 100.76 times more volatile than Core Plus Fund. It trades about 0.04 of its potential returns per unit of risk. Core Plus Fund is currently generating about 0.03 per unit of risk. If you would invest 2,152 in Equity Growth Fund on September 23, 2024 and sell it today you would earn a total of 1,248 from holding Equity Growth Fund or generate 57.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Equity Growth Fund vs. Core Plus Fund
Performance |
Timeline |
Equity Growth |
Core Plus Fund |
Equity Growth and Core Plus Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Equity Growth and Core Plus
The main advantage of trading using opposite Equity Growth and Core Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, Core Plus 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 Core Plus will offset losses from the drop in Core Plus' long position.Equity Growth vs. Franklin Government Money | Equity Growth vs. Schwab Treasury Money | Equity Growth vs. General Money Market | Equity Growth vs. Chestnut Street Exchange |
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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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