Correlation Between Growth Strategy and Gold Portfolio

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

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

Diversification Opportunities for Growth Strategy and Gold Portfolio

0.26

Correlation Coefficient

Growth Strategy  Gold Portfolio

Modest diversification

The 3 months correlation between Growth and Gold is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund and Gold Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Portfolio Fidelity and Growth Strategy 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 Growth Strategy Fund are associated (or correlated) with Gold Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Portfolio Fidelity has no effect on the direction of Growth Strategy i.e., Growth Strategy and Gold Portfolio go up and down completely randomly.

Pair Corralation between Growth Strategy and Gold Portfolio

Assuming the 90 days horizon Growth Strategy Fund is expected to generate 0.37 times more return on investment than Gold Portfolio. However, Growth Strategy Fund is 2.7 times less risky than Gold Portfolio. It trades about 0.07 of its potential returns per unit of risk. Gold Portfolio Fidelity is currently generating about 0.01 per unit of risk. If you would invest  1,000.00  in Growth Strategy Fund on October 9, 2024 and sell it today you would earn a total of  254.00  from holding Growth Strategy Fund or generate 25.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Growth Strategy Fund  vs.  Gold Portfolio Fidelity

Growth Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gold Portfolio Fidelity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gold Portfolio Fidelity has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Growth Strategy and Gold Portfolio

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

The idea behind Growth Strategy Fund and Gold Portfolio Fidelity 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.