Correlation Between Dynamic Growth and Spectrum Fund

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

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

Diversification Opportunities for Dynamic Growth and Spectrum Fund

0.99

Correlation Coefficient

Dynamic Growth  Spectrum Fund

No risk reduction

The 3 months correlation between Dynamic and Spectrum is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Dynamic Growth Fund and Spectrum Fund Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spectrum Fund Instit and Dynamic 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 Dynamic Growth Fund are associated (or correlated) with Spectrum Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spectrum Fund Instit has no effect on the direction of Dynamic Growth i.e., Dynamic Growth and Spectrum Fund go up and down completely randomly.

Pair Corralation between Dynamic Growth and Spectrum Fund

Assuming the 90 days horizon Dynamic Growth Fund is expected to under-perform the Spectrum Fund. In addition to that, Dynamic Growth is 1.34 times more volatile than Spectrum Fund Institutional. It trades about -0.12 of its total potential returns per unit of risk. Spectrum Fund Institutional is currently generating about -0.11 per unit of volatility. If you would invest  1,539  in Spectrum Fund Institutional on December 2, 2024 and sell it today you would lose (138.00) from holding Spectrum Fund Institutional or give up 8.97% of portfolio value over 90 days.

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

Dynamic Growth Fund  vs.  Spectrum Fund Institutional

Dynamic Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dynamic Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Spectrum Fund Instit

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spectrum Fund Institutional has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Dynamic Growth and Spectrum Fund

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

The idea behind Dynamic Growth Fund and Spectrum Fund Institutional 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.