Correlation Between Heritage Fund and Growth Fund

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

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

Diversification Opportunities for Heritage Fund and Growth Fund

0.83

Correlation Coefficient

Heritage Fund  Growth Fund

Very poor diversification

The 3 months correlation between Heritage and Growth is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Fund Investor and Growth Fund I in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund I and Heritage 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 Heritage Fund Investor are associated (or correlated) with Growth Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Fund I has no effect on the direction of Heritage Fund i.e., Heritage Fund and Growth Fund go up and down completely randomly.

Pair Corralation between Heritage Fund and Growth Fund

Assuming the 90 days horizon Heritage Fund Investor is expected to under-perform the Growth Fund. In addition to that, Heritage Fund is 1.7 times more volatile than Growth Fund I. It trades about -0.03 of its total potential returns per unit of risk. Growth Fund I is currently generating about 0.05 per unit of volatility. If you would invest  6,044  in Growth Fund I on September 26, 2024 and sell it today you would earn a total of  198.00  from holding Growth Fund I or generate 3.28% return on investment over 90 days.

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

Heritage Fund Investor  vs.  Growth Fund I

Heritage Fund Investor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heritage Fund Investor has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Heritage Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Growth Fund I

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Fund I are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Growth Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Heritage Fund and Growth Fund

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

The idea behind Heritage Fund Investor and Growth Fund I 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.