Correlation Between Growth Opportunities and Chase Growth

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

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

Diversification Opportunities for Growth Opportunities and Chase Growth

0.99

Correlation Coefficient

Growth Opportunities  Chase Growth

No risk reduction

The 3 months correlation between GROWTH and Chase is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Growth Opportunities Fund and Chase Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chase Growth and Growth Opportunities 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 Opportunities Fund are associated (or correlated) with Chase Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chase Growth has no effect on the direction of Growth Opportunities i.e., Growth Opportunities and Chase Growth go up and down completely randomly.

Pair Corralation between Growth Opportunities and Chase Growth

Assuming the 90 days horizon Growth Opportunities Fund is expected to generate 1.05 times more return on investment than Chase Growth. However, Growth Opportunities is 1.05 times more volatile than Chase Growth Fund. It trades about 0.11 of its potential returns per unit of risk. Chase Growth Fund is currently generating about 0.09 per unit of risk. If you would invest  3,320  in Growth Opportunities Fund on August 31, 2024 and sell it today you would earn a total of  2,496  from holding Growth Opportunities Fund or generate 75.18% return on investment over 90 days.

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

Growth Opportunities Fund  vs.  Chase Growth Fund

Growth Opportunities

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Opportunities Fund are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Growth Opportunities may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Chase Growth

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chase Growth Fund are ranked lower than 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Chase Growth showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Growth Opportunities and Chase Growth

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

The idea behind Growth Opportunities Fund and Chase 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.