Correlation Between Growth Portfolio and Ariel Appreciation

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

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

Diversification Opportunities for Growth Portfolio and Ariel Appreciation

0.81

Correlation Coefficient

Growth Portfolio  Ariel Appreciation

Very poor diversification

The 3 months correlation between Growth and Ariel is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Growth Portfolio Class and Ariel Appreciation Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ariel Appreciation and Growth Portfolio 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 Portfolio Class are associated (or correlated) with Ariel Appreciation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ariel Appreciation has no effect on the direction of Growth Portfolio i.e., Growth Portfolio and Ariel Appreciation go up and down completely randomly.

Pair Corralation between Growth Portfolio and Ariel Appreciation

Assuming the 90 days horizon Growth Portfolio Class is expected to generate 1.61 times more return on investment than Ariel Appreciation. However, Growth Portfolio is 1.61 times more volatile than Ariel Appreciation Fund. It trades about 0.37 of its potential returns per unit of risk. Ariel Appreciation Fund is currently generating about 0.16 per unit of risk. If you would invest  4,199  in Growth Portfolio Class on September 12, 2024 and sell it today you would earn a total of  1,967  from holding Growth Portfolio Class or generate 46.84% return on investment over 90 days.

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

Growth Portfolio Class  vs.  Ariel Appreciation Fund

Growth Portfolio Class

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Portfolio Class are ranked lower than 29 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Growth Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Ariel Appreciation

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Growth Portfolio and Ariel Appreciation

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

The idea behind Growth Portfolio Class and Ariel Appreciation 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.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.