Correlation Between Capital Appreciation and Blue Chip

Can any of the company-specific risk be diversified away by investing in both Capital Appreciation and Blue Chip 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 Capital Appreciation and Blue Chip into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Capital Appreciation and Blue Chip

0.96

Correlation Coefficient

Capital Appreciation  Blue Chip

Almost no diversification

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

Pair Corralation between Capital Appreciation and Blue Chip

Assuming the 90 days horizon Capital Appreciation is expected to generate 1.09 times less return on investment than Blue Chip. In addition to that, Capital Appreciation is 1.05 times more volatile than Blue Chip Growth. It trades about 0.07 of its total potential returns per unit of risk. Blue Chip Growth is currently generating about 0.08 per unit of volatility. If you would invest  5,959  in Blue Chip Growth on September 15, 2024 and sell it today you would earn a total of  718.00  from holding Blue Chip Growth or generate 12.05% return on investment over 90 days.

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

Capital Appreciation Fund  vs.  Blue Chip Growth

Capital Appreciation

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Appreciation Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Capital Appreciation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Blue Chip Growth

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Blue Chip Growth are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Blue Chip may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Capital Appreciation and Blue Chip

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

The idea behind Capital Appreciation Fund and Blue Chip Growth 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.