Correlation Between Aggressive Growth and Cajxx

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

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

Diversification Opportunities for Aggressive Growth and Cajxx

-0.59

Correlation Coefficient

Aggressive Growth  Cajxx

Excellent diversification

The 3 months correlation between Aggressive and Cajxx is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Growth Portfolio and Cajxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cajxx and Aggressive 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 Aggressive Growth Portfolio are associated (or correlated) with Cajxx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cajxx has no effect on the direction of Aggressive Growth i.e., Aggressive Growth and Cajxx go up and down completely randomly.

Pair Corralation between Aggressive Growth and Cajxx

Assuming the 90 days horizon Aggressive Growth is expected to generate 83.28 times less return on investment than Cajxx. But when comparing it to its historical volatility, Aggressive Growth Portfolio is 50.31 times less risky than Cajxx. It trades about 0.07 of its potential returns per unit of risk. Cajxx is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  492.00  in Cajxx on September 29, 2024 and sell it today you would lose (392.00) from holding Cajxx or give up 79.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Aggressive Growth Portfolio  vs.  Cajxx

Aggressive Growth

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Growth Portfolio are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Aggressive Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Cajxx

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cajxx are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Cajxx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aggressive Growth and Cajxx

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

The idea behind Aggressive Growth Portfolio and Cajxx 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..