Correlation Between Growth Fund and One Choice

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

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

Diversification Opportunities for Growth Fund and One Choice

0.63

Correlation Coefficient

Growth Fund  One Choice

Poor diversification

The 3 months correlation between Growth and One is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund I and One Choice Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Choice Portfolio and Growth 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 Growth Fund I are associated (or correlated) with One Choice. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Choice Portfolio has no effect on the direction of Growth Fund i.e., Growth Fund and One Choice go up and down completely randomly.

Pair Corralation between Growth Fund and One Choice

Assuming the 90 days horizon Growth Fund I is expected to generate 2.98 times more return on investment than One Choice. However, Growth Fund is 2.98 times more volatile than One Choice Portfolio. It trades about 0.24 of its potential returns per unit of risk. One Choice Portfolio is currently generating about 0.1 per unit of risk. If you would invest  6,301  in Growth Fund I on September 12, 2024 and sell it today you would earn a total of  291.00  from holding Growth Fund I or generate 4.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Growth Fund I  vs.  One Choice Portfolio

Growth Fund I

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Fund I are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Growth Fund may actually be approaching a critical reversion point that can send shares even higher in January 2025.

One Choice Portfolio

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in One Choice Portfolio are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, One Choice is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Growth Fund and One Choice

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

The idea behind Growth Fund I and One Choice Portfolio 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.