Correlation Between Growth Strategy and Strategic Bond

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

Diversification Opportunities for Growth Strategy and Strategic Bond

-0.06

Correlation Coefficient

Growth Strategy  Strategic Bond

Good diversification

The 3 months correlation between Growth and Strategic is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Growth Strategy Fund and Strategic Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Bond 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 Strategic Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Bond has no effect on the direction of Growth Strategy i.e., Growth Strategy and Strategic Bond go up and down completely randomly.

Pair Corralation between Growth Strategy and Strategic Bond

Assuming the 90 days horizon Growth Strategy Fund is expected to under-perform the Strategic Bond. In addition to that, Growth Strategy is 2.46 times more volatile than Strategic Bond Fund. It trades about -0.02 of its total potential returns per unit of risk. Strategic Bond Fund is currently generating about 0.14 per unit of volatility. If you would invest  895.00  in Strategic Bond Fund on December 30, 2024 and sell it today you would earn a total of  23.00  from holding Strategic Bond Fund or generate 2.57% return on investment over 90 days.

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

Growth Strategy Fund  vs.  Strategic Bond Fund

Growth Strategy

Risk-Adjusted Performance

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.

Strategic Bond

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Bond Fund are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Strategic Bond 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 Strategic Bond

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

The idea behind Growth Strategy Fund and Strategic Bond 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.