Correlation Between Growth Allocation and Strategic Advisers

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

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

Diversification Opportunities for Growth Allocation and Strategic Advisers

0.69

Correlation Coefficient

Growth Allocation  Strategic Advisers

Poor diversification

The 3 months correlation between Growth and Strategic is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Growth Allocation Index and Strategic Advisers Small Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Advisers and Growth 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 Growth Allocation Index are associated (or correlated) with Strategic Advisers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Advisers has no effect on the direction of Growth Allocation i.e., Growth Allocation and Strategic Advisers go up and down completely randomly.

Pair Corralation between Growth Allocation and Strategic Advisers

Assuming the 90 days horizon Growth Allocation Index is expected to generate 0.56 times more return on investment than Strategic Advisers. However, Growth Allocation Index is 1.78 times less risky than Strategic Advisers. It trades about 0.0 of its potential returns per unit of risk. Strategic Advisers Small Mid is currently generating about -0.06 per unit of risk. If you would invest  1,116  in Growth Allocation Index on December 1, 2024 and sell it today you would lose (2.00) from holding Growth Allocation Index or give up 0.18% of portfolio value over 90 days.

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

Growth Allocation Index  vs.  Strategic Advisers Small Mid

Growth Allocation Index

Risk-Adjusted Performance

Very Weak

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

Strategic Advisers

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Growth Allocation and Strategic Advisers

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

The idea behind Growth Allocation Index and Strategic Advisers Small Mid 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.