Correlation Between Victory Diversified and Capital Growth

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

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

Diversification Opportunities for Victory Diversified and Capital Growth

0.96

Correlation Coefficient

Victory Diversified  Capital Growth

Almost no diversification

The 3 months correlation between Victory and Capital is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Victory Diversified Stock and Capital Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Growth and Victory Diversified 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 Victory Diversified Stock are associated (or correlated) with Capital Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Growth has no effect on the direction of Victory Diversified i.e., Victory Diversified and Capital Growth go up and down completely randomly.

Pair Corralation between Victory Diversified and Capital Growth

Assuming the 90 days horizon Victory Diversified Stock is expected to generate 1.27 times more return on investment than Capital Growth. However, Victory Diversified is 1.27 times more volatile than Capital Growth Fund. It trades about 0.14 of its potential returns per unit of risk. Capital Growth Fund is currently generating about 0.14 per unit of risk. If you would invest  2,177  in Victory Diversified Stock on October 20, 2024 and sell it today you would earn a total of  48.00  from holding Victory Diversified Stock or generate 2.2% return on investment over 90 days.

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

Victory Diversified Stock  vs.  Capital Growth Fund

Victory Diversified Stock

Risk-Adjusted Performance

0 of 100

Very Weak

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

Capital Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capital Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and 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 Victory Diversified and Capital Growth

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

The idea behind Victory Diversified Stock and Capital 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..