Correlation Between Science Technology and Aggressive Growth
Can any of the company-specific risk be diversified away by investing in both Science Technology and Aggressive 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 Science Technology and Aggressive Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Science Technology Fund and Aggressive Growth Fund, you can compare the effects of market volatilities on Science Technology and Aggressive 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 Science Technology with a short position of Aggressive Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Science Technology and Aggressive Growth.
Diversification Opportunities for Science Technology and Aggressive Growth
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Science and Aggressive is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Science Technology Fund and Aggressive Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aggressive Growth and Science Technology 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 Science Technology Fund are associated (or correlated) with Aggressive Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aggressive Growth has no effect on the direction of Science Technology i.e., Science Technology and Aggressive Growth go up and down completely randomly.
Pair Corralation between Science Technology and Aggressive Growth
Assuming the 90 days horizon Science Technology Fund is expected to generate 1.11 times more return on investment than Aggressive Growth. However, Science Technology is 1.11 times more volatile than Aggressive Growth Fund. It trades about 0.21 of its potential returns per unit of risk. Aggressive Growth Fund is currently generating about 0.2 per unit of risk. If you would invest 2,664 in Science Technology Fund on September 4, 2024 and sell it today you would earn a total of 455.00 from holding Science Technology Fund or generate 17.08% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Science Technology Fund vs. Aggressive Growth Fund
Performance |
Timeline |
Science Technology |
Aggressive Growth |
Science Technology and Aggressive Growth Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Science Technology and Aggressive Growth
The main advantage of trading using opposite Science Technology and Aggressive Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Science Technology position performs unexpectedly, Aggressive 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 Aggressive Growth will offset losses from the drop in Aggressive Growth's long position.Science Technology vs. Aggressive Growth Fund | Science Technology vs. Sp 500 Index | Science Technology vs. Nasdaq 100 Index Fund | Science Technology vs. International Fund International |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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