Correlation Between Growth Fund and Large Pany

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

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

Diversification Opportunities for Growth Fund and Large Pany

0.75

Correlation Coefficient

Growth Fund  Large Pany

Poor diversification

The 3 months correlation between Growth and Large is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Investor and Large Pany Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Large Pany Value and Growth Fund 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 Fund Investor are associated (or correlated) with Large Pany. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Large Pany Value has no effect on the direction of Growth Fund i.e., Growth Fund and Large Pany go up and down completely randomly.

Pair Corralation between Growth Fund and Large Pany

Assuming the 90 days horizon Growth Fund Investor is expected to generate 1.75 times more return on investment than Large Pany. However, Growth Fund is 1.75 times more volatile than Large Pany Value. It trades about 0.16 of its potential returns per unit of risk. Large Pany Value is currently generating about 0.1 per unit of risk. If you would invest  5,545  in Growth Fund Investor on September 3, 2024 and sell it today you would earn a total of  554.00  from holding Growth Fund Investor or generate 9.99% return on investment over 90 days.

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

Growth Fund Investor  vs.  Large Pany Value

Growth Fund Investor

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Fund Investor are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Growth Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Large Pany Value

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Large Pany Value are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Large Pany 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 Fund and Large Pany

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

The idea behind Growth Fund Investor and Large Pany Value 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.