Correlation Between Growth Strategy and One Rock

Can any of the company-specific risk be diversified away by investing in both Growth Strategy and One Rock 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 One Rock 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 One Rock Fund, you can compare the effects of market volatilities on Growth Strategy and One Rock 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 One Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Strategy and One Rock.

Diversification Opportunities for Growth Strategy and One Rock

0.59

Correlation Coefficient

Growth Strategy  One Rock

Very weak diversification

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

Pair Corralation between Growth Strategy and One Rock

Assuming the 90 days horizon Growth Strategy Fund is expected to generate 0.14 times more return on investment than One Rock. However, Growth Strategy Fund is 6.99 times less risky than One Rock. It trades about -0.31 of its potential returns per unit of risk. One Rock Fund is currently generating about -0.2 per unit of risk. If you would invest  1,308  in Growth Strategy Fund on October 9, 2024 and sell it today you would lose (54.00) from holding Growth Strategy Fund or give up 4.13% of portfolio value over 90 days.

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

Growth Strategy Fund  vs.  One Rock Fund

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.

One Rock Fund

Risk-Adjusted Performance

1 of 100

Weak

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

Pair Trading with Growth Strategy and One Rock

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

The idea behind Growth Strategy Fund and One Rock 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.