Correlation Between Capital Growth and Value Fund

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

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

Diversification Opportunities for Capital Growth and Value Fund

0.96

Correlation Coefficient

Capital Growth  Value Fund

Almost no diversification

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

Pair Corralation between Capital Growth and Value Fund

Assuming the 90 days horizon Capital Growth Fund is expected to generate 0.87 times more return on investment than Value Fund. However, Capital Growth Fund is 1.15 times less risky than Value Fund. It trades about -0.3 of its potential returns per unit of risk. Value Fund Value is currently generating about -0.34 per unit of risk. If you would invest  1,474  in Capital Growth Fund on September 24, 2024 and sell it today you would lose (200.00) from holding Capital Growth Fund or give up 13.57% of portfolio value over 90 days.

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

Capital Growth Fund  vs.  Value Fund Value

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 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.

Value Fund Value

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Value Fund Value 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 basic 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 Capital Growth and Value Fund

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

The idea behind Capital Growth Fund and Value Fund 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.