Correlation Between The Growth and Scout Unconstrained

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

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

Diversification Opportunities for The Growth and Scout Unconstrained

-0.24

Correlation Coefficient

The Growth  Scout Unconstrained

Very good diversification

The 3 months correlation between The and Scout is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding The Growth Equity and Scout Unconstrained Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scout Unconstrained Bond and The 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 The Growth Equity are associated (or correlated) with Scout Unconstrained. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scout Unconstrained Bond has no effect on the direction of The Growth i.e., The Growth and Scout Unconstrained go up and down completely randomly.

Pair Corralation between The Growth and Scout Unconstrained

Assuming the 90 days horizon The Growth Equity is expected to generate 2.5 times more return on investment than Scout Unconstrained. However, The Growth is 2.5 times more volatile than Scout Unconstrained Bond. It trades about 0.1 of its potential returns per unit of risk. Scout Unconstrained Bond is currently generating about 0.06 per unit of risk. If you would invest  2,880  in The Growth Equity on October 4, 2024 and sell it today you would earn a total of  985.00  from holding The Growth Equity or generate 34.2% return on investment over 90 days.

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

The Growth Equity  vs.  Scout Unconstrained Bond

Growth Equity

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Growth Equity are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, The Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Scout Unconstrained Bond

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with The Growth and Scout Unconstrained

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

The idea behind The Growth Equity and Scout Unconstrained Bond 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.