Correlation Between Qs Growth and Growth Income

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

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

Diversification Opportunities for Qs Growth and Growth Income

0.99

Correlation Coefficient

Qs Growth  Growth Income

No risk reduction

The 3 months correlation between LANIX and Growth is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Qs Growth Fund and Growth Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Income and Qs 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 Qs Growth Fund are associated (or correlated) with Growth Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Income has no effect on the direction of Qs Growth i.e., Qs Growth and Growth Income go up and down completely randomly.

Pair Corralation between Qs Growth and Growth Income

Assuming the 90 days horizon Qs Growth is expected to generate 1.33 times less return on investment than Growth Income. But when comparing it to its historical volatility, Qs Growth Fund is 1.22 times less risky than Growth Income. It trades about 0.37 of its potential returns per unit of risk. Growth Income Fund is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  3,295  in Growth Income Fund on September 4, 2024 and sell it today you would earn a total of  223.00  from holding Growth Income Fund or generate 6.77% return on investment over 90 days.

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

Qs Growth Fund  vs.  Growth Income Fund

Qs Growth Fund

Risk-Adjusted Performance

14 of 100

Good

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

Growth Income

Risk-Adjusted Performance

17 of 100

Solid

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

Pair Trading with Qs Growth and Growth Income

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

The idea behind Qs Growth Fund and Growth Income Fund 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.