Correlation Between Income Growth and NATIONAL

Can any of the company-specific risk be diversified away by investing in both Income Growth and NATIONAL 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 NATIONAL 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 NATIONAL RURAL UTILS, you can compare the effects of market volatilities on Income Growth and NATIONAL 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 NATIONAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Growth and NATIONAL.

Diversification Opportunities for Income Growth and NATIONAL

-0.46

Correlation Coefficient

Income Growth  NATIONAL

Very good diversification

The 3 months correlation between Income and NATIONAL is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Income Growth Fund and NATIONAL RURAL UTILS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATIONAL RURAL UTILS 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 NATIONAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATIONAL RURAL UTILS has no effect on the direction of Income Growth i.e., Income Growth and NATIONAL go up and down completely randomly.

Pair Corralation between Income Growth and NATIONAL

Assuming the 90 days horizon Income Growth is expected to generate 107.29 times less return on investment than NATIONAL. But when comparing it to its historical volatility, Income Growth Fund is 104.32 times less risky than NATIONAL. It trades about 0.07 of its potential returns per unit of risk. NATIONAL RURAL UTILS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  9,429  in NATIONAL RURAL UTILS on September 1, 2024 and sell it today you would earn a total of  89.00  from holding NATIONAL RURAL UTILS or generate 0.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	62.83%
Values	Daily Returns

Income Growth Fund  vs.  NATIONAL RURAL UTILS

Income Growth

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Income Growth Fund are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Income Growth may actually be approaching a critical reversion point that can send shares even higher in December 2024.

NATIONAL RURAL UTILS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NATIONAL RURAL UTILS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NATIONAL 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 NATIONAL

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

The idea behind Income Growth Fund and NATIONAL RURAL UTILS 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.