Correlation Between Strategic Allocation: and Growth Opportunities

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

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

Diversification Opportunities for Strategic Allocation: and Growth Opportunities

0.77

Correlation Coefficient

Strategic Allocation:  Growth Opportunities

Poor diversification

The 3 months correlation between Strategic and Growth is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and Growth Opportunities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Opportunities and Strategic Allocation: 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 Strategic Allocation Moderate are associated (or correlated) with Growth Opportunities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Opportunities has no effect on the direction of Strategic Allocation: i.e., Strategic Allocation: and Growth Opportunities go up and down completely randomly.

Pair Corralation between Strategic Allocation: and Growth Opportunities

Assuming the 90 days horizon Strategic Allocation Moderate is expected to generate 0.49 times more return on investment than Growth Opportunities. However, Strategic Allocation Moderate is 2.05 times less risky than Growth Opportunities. It trades about 0.1 of its potential returns per unit of risk. Growth Opportunities Fund is currently generating about -0.06 per unit of risk. If you would invest  640.00  in Strategic Allocation Moderate on October 23, 2024 and sell it today you would earn a total of  6.00  from holding Strategic Allocation Moderate or generate 0.94% return on investment over 90 days.

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

Strategic Allocation Moderate  vs.  Growth Opportunities Fund

Strategic Allocation:

Risk-Adjusted Performance

0 of 100

Very Weak

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

Growth Opportunities

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Opportunities Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Growth Opportunities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Strategic Allocation: and Growth Opportunities

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

The idea behind Strategic Allocation Moderate and Growth Opportunities Fund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.