Correlation Between Income Growth and Seafarer Overseas

Can any of the company-specific risk be diversified away by investing in both Income Growth and Seafarer Overseas 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 Income Growth and Seafarer Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Income Growth Fund and Seafarer Overseas Growth, you can compare the effects of market volatilities on Income Growth and Seafarer Overseas 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 Income Growth with a short position of Seafarer Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Growth and Seafarer Overseas.

Diversification Opportunities for Income Growth and Seafarer Overseas

0.72

Correlation Coefficient

Income Growth  Seafarer Overseas

Poor diversification

The 3 months correlation between Income and Seafarer is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Income Growth Fund and Seafarer Overseas Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seafarer Overseas Growth and Income 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 Income Growth Fund are associated (or correlated) with Seafarer Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seafarer Overseas Growth has no effect on the direction of Income Growth i.e., Income Growth and Seafarer Overseas go up and down completely randomly.

Pair Corralation between Income Growth and Seafarer Overseas

Assuming the 90 days horizon Income Growth Fund is expected to under-perform the Seafarer Overseas. In addition to that, Income Growth is 1.2 times more volatile than Seafarer Overseas Growth. It trades about -0.13 of its total potential returns per unit of risk. Seafarer Overseas Growth is currently generating about 0.05 per unit of volatility. If you would invest  1,203  in Seafarer Overseas Growth on November 29, 2024 and sell it today you would earn a total of  19.00  from holding Seafarer Overseas Growth or generate 1.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Income Growth Fund  vs.  Seafarer Overseas Growth

Income Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Income Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Income Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Seafarer Overseas Growth

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Seafarer Overseas Growth are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Seafarer Overseas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Income Growth and Seafarer Overseas

The main advantage of trading using opposite Income Growth and Seafarer Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Growth position performs unexpectedly, Seafarer Overseas 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 Seafarer Overseas will offset losses from the drop in Seafarer Overseas' long position.

The idea behind Income Growth Fund and Seafarer Overseas Growth pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.