Correlation Between Growth Opportunities and Vanguard Growth

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

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

Diversification Opportunities for Growth Opportunities and Vanguard Growth

0.99

Correlation Coefficient

Growth Opportunities  Vanguard Growth

No risk reduction

The 3 months correlation between GROWTH and VANGUARD is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Growth Opportunities Fund and Vanguard Growth And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth And and Growth Opportunities 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 Opportunities Fund are associated (or correlated) with Vanguard Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth And has no effect on the direction of Growth Opportunities i.e., Growth Opportunities and Vanguard Growth go up and down completely randomly.

Pair Corralation between Growth Opportunities and Vanguard Growth

Assuming the 90 days horizon Growth Opportunities Fund is expected to generate 1.28 times more return on investment than Vanguard Growth. However, Growth Opportunities is 1.28 times more volatile than Vanguard Growth And. It trades about 0.19 of its potential returns per unit of risk. Vanguard Growth And is currently generating about 0.2 per unit of risk. If you would invest  5,187  in Growth Opportunities Fund on August 31, 2024 and sell it today you would earn a total of  629.00  from holding Growth Opportunities Fund or generate 12.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Growth Opportunities Fund  vs.  Vanguard Growth And

Growth Opportunities

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Opportunities Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Growth Opportunities may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Vanguard Growth And

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard Growth And are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly inconsistent basic indicators, Vanguard Growth may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Growth Opportunities and Vanguard Growth

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

The idea behind Growth Opportunities Fund and Vanguard Growth And 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.