Correlation Between Growth Fund and Research Portfolio

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

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

Diversification Opportunities for Growth Fund and Research Portfolio

0.96

Correlation Coefficient

Growth Fund  Research Portfolio

Almost no diversification

The 3 months correlation between Growth and Research is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and Research Portfolio Institution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Research Portfolio and Growth 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 Growth Fund Of are associated (or correlated) with Research Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Research Portfolio has no effect on the direction of Growth Fund i.e., Growth Fund and Research Portfolio go up and down completely randomly.

Pair Corralation between Growth Fund and Research Portfolio

Assuming the 90 days horizon Growth Fund is expected to generate 1.34 times less return on investment than Research Portfolio. But when comparing it to its historical volatility, Growth Fund Of is 1.05 times less risky than Research Portfolio. It trades about 0.08 of its potential returns per unit of risk. Research Portfolio Institutional is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  4,136  in Research Portfolio Institutional on September 12, 2024 and sell it today you would earn a total of  1,907  from holding Research Portfolio Institutional or generate 46.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.72%
Values	Daily Returns

Growth Fund Of  vs.  Research Portfolio Institution

Growth Fund

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Fund Of are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Growth Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Research Portfolio

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Research Portfolio Institutional are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Research Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Growth Fund and Research Portfolio

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

The idea behind Growth Fund Of and Research Portfolio 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.