Correlation Between Select Fund and Global Growth

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

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

Diversification Opportunities for Select Fund and Global Growth

-0.07

Correlation Coefficient

Select Fund  Global Growth

Good diversification

The 3 months correlation between Select and Global is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Select Fund Investor and Global Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Growth and Select 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 Select Fund Investor are associated (or correlated) with Global Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Growth has no effect on the direction of Select Fund i.e., Select Fund and Global Growth go up and down completely randomly.

Pair Corralation between Select Fund and Global Growth

Assuming the 90 days horizon Select Fund Investor is expected to generate 0.49 times more return on investment than Global Growth. However, Select Fund Investor is 2.06 times less risky than Global Growth. It trades about 0.17 of its potential returns per unit of risk. Global Growth Fund is currently generating about -0.11 per unit of risk. If you would invest  12,002  in Select Fund Investor on September 19, 2024 and sell it today you would earn a total of  1,124  from holding Select Fund Investor or generate 9.37% return on investment over 90 days.

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

Select Fund Investor  vs.  Global Growth Fund

Select Fund Investor

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Select Fund Investor are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Select Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Select Fund and Global Growth

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

The idea behind Select Fund Investor and Global 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.