Correlation Between Equity Growth and Global Growth
Can any of the company-specific risk be diversified away by investing in both Equity Growth and Global Growth 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 Global Growth 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 Global Growth Fund, you can compare the effects of market volatilities on Equity Growth and Global Growth 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 Global Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equity Growth and Global Growth.
Diversification Opportunities for Equity Growth and Global Growth
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equity and Global is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Equity Growth Fund and Global Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Growth 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 Global Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Growth has no effect on the direction of Equity Growth i.e., Equity Growth and Global Growth go up and down completely randomly.
Pair Corralation between Equity Growth and Global Growth
Assuming the 90 days horizon Equity Growth Fund is expected to generate 0.77 times more return on investment than Global Growth. However, Equity Growth Fund is 1.31 times less risky than Global Growth. It trades about 0.11 of its potential returns per unit of risk. Global Growth Fund is currently generating about 0.03 per unit of risk. If you would invest 2,154 in Equity Growth Fund on December 4, 2024 and sell it today you would earn a total of 1,158 from holding Equity Growth Fund or generate 53.76% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.8% |
Values | Daily Returns |
Equity Growth Fund vs. Global Growth Fund
Performance |
Timeline |
Equity Growth |
Global Growth |
Equity Growth and Global Growth Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Equity Growth and Global Growth
The main advantage of trading using opposite Equity Growth and Global Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equity Growth position performs unexpectedly, Global Growth 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 Global Growth will offset losses from the drop in Global Growth's long position.Equity Growth vs. Income Growth Fund | Equity Growth vs. Equity Income Fund | Equity Growth vs. International Growth Fund | Equity Growth vs. Value Fund Investor |
Global Growth vs. Emerging Markets Fund | Global Growth vs. International Growth Fund | Global Growth vs. Heritage Fund Investor | Global Growth vs. Select Fund Investor |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
Other Complementary Tools
Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing |