Correlation Between Cargile Fund and Growth Equity

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

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

Diversification Opportunities for Cargile Fund and Growth Equity

0.77

Correlation Coefficient

Cargile Fund  Growth Equity

Poor diversification

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

Pair Corralation between Cargile Fund and Growth Equity

Assuming the 90 days horizon Cargile Fund is expected to generate 0.52 times more return on investment than Growth Equity. However, Cargile Fund is 1.92 times less risky than Growth Equity. It trades about -0.22 of its potential returns per unit of risk. The Growth Equity is currently generating about -0.15 per unit of risk. If you would invest  915.00  in Cargile Fund on October 10, 2024 and sell it today you would lose (23.00) from holding Cargile Fund or give up 2.51% of portfolio value over 90 days.

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

Cargile Fund  vs.  The Growth Equity

Cargile Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Growth Equity

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Cargile Fund and Growth Equity

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

The idea behind Cargile Fund and The Growth Equity 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.