Correlation Between Provident Trust and Polen Growth

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

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

Diversification Opportunities for Provident Trust and Polen Growth

0.84

Correlation Coefficient

Provident Trust  Polen Growth

Very poor diversification

The 3 months correlation between Provident and Polen is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Provident Trust Strategy and Polen Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polen Growth and Provident Trust 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 Provident Trust Strategy are associated (or correlated) with Polen Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polen Growth has no effect on the direction of Provident Trust i.e., Provident Trust and Polen Growth go up and down completely randomly.

Pair Corralation between Provident Trust and Polen Growth

Assuming the 90 days horizon Provident Trust is expected to generate 1.69 times less return on investment than Polen Growth. But when comparing it to its historical volatility, Provident Trust Strategy is 1.3 times less risky than Polen Growth. It trades about 0.07 of its potential returns per unit of risk. Polen Growth Fund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,985  in Polen Growth Fund on September 25, 2024 and sell it today you would earn a total of  1,606  from holding Polen Growth Fund or generate 53.8% return on investment over 90 days.

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

Provident Trust Strategy  vs.  Polen Growth Fund

Provident Trust Strategy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Trust Strategy are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Provident Trust is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Polen Growth

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Polen Growth Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Polen Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Provident Trust and Polen Growth

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

The idea behind Provident Trust Strategy and Polen Growth 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.