Correlation Between Growth Fund and Iman Fund

Can any of the company-specific risk be diversified away by investing in both Growth Fund and Iman 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 Growth Fund and Iman Fund 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 Iman Fund Class, you can compare the effects of market volatilities on Growth Fund and Iman 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 Growth Fund with a short position of Iman Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Iman Fund.

Diversification Opportunities for Growth Fund and Iman Fund

0.76

Correlation Coefficient

Growth Fund  Iman Fund

Poor diversification

The 3 months correlation between Growth and Iman is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and Iman Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iman Fund Class 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 Iman Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iman Fund Class has no effect on the direction of Growth Fund i.e., Growth Fund and Iman Fund go up and down completely randomly.

Pair Corralation between Growth Fund and Iman Fund

Assuming the 90 days horizon Growth Fund Of is expected to under-perform the Iman Fund. In addition to that, Growth Fund is 1.81 times more volatile than Iman Fund Class. It trades about -0.08 of its total potential returns per unit of risk. Iman Fund Class is currently generating about -0.08 per unit of volatility. If you would invest  1,680  in Iman Fund Class on December 3, 2024 and sell it today you would lose (80.00) from holding Iman Fund Class or give up 4.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Growth Fund Of  vs.  Iman Fund Class

Growth Fund

Risk-Adjusted Performance

Very Weak

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

Iman Fund Class

Risk-Adjusted Performance

Very Weak

Over the last 90 days Iman Fund Class has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Iman Fund 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 Fund and Iman Fund

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

The idea behind Growth Fund Of and Iman Fund Class 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.