Correlation Between Fundamental Large and Growth Fund

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

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

Diversification Opportunities for Fundamental Large and Growth Fund

0.92

Correlation Coefficient

Fundamental Large  Growth Fund

Almost no diversification

The 3 months correlation between Fundamental and Growth is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fundamental Large Cap and Growth Fund Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund and Fundamental Large 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 Fundamental Large Cap are associated (or correlated) with Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund has no effect on the direction of Fundamental Large i.e., Fundamental Large and Growth Fund go up and down completely randomly.

Pair Corralation between Fundamental Large and Growth Fund

Assuming the 90 days horizon Fundamental Large is expected to generate 2.0 times less return on investment than Growth Fund. But when comparing it to its historical volatility, Fundamental Large Cap is 1.18 times less risky than Growth Fund. It trades about 0.03 of its potential returns per unit of risk. Growth Fund Of is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,715  in Growth Fund Of on October 24, 2024 and sell it today you would earn a total of  960.00  from holding Growth Fund Of or generate 16.8% return on investment over 90 days.

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

Fundamental Large Cap  vs.  Growth Fund Of

Fundamental Large Cap

Risk-Adjusted Performance

0 of 100

Very Weak

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

Growth Fund

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Fundamental Large and Growth Fund

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

The idea behind Fundamental Large Cap and Growth Fund Of 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.