Correlation Between Aggressive Growth and Strategic Advisers

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

By analyzing existing cross correlation between Aggressive Growth Allocation and Strategic Advisers Small Mid, you can compare the effects of market volatilities on Aggressive Growth and Strategic Advisers 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 Aggressive Growth with a short position of Strategic Advisers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aggressive Growth and Strategic Advisers.

Diversification Opportunities for Aggressive Growth and Strategic Advisers

0.83

Correlation Coefficient

Aggressive Growth  Strategic Advisers

Very poor diversification

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

Pair Corralation between Aggressive Growth and Strategic Advisers

Assuming the 90 days horizon Aggressive Growth Allocation is expected to generate 0.77 times more return on investment than Strategic Advisers. However, Aggressive Growth Allocation is 1.29 times less risky than Strategic Advisers. It trades about 0.08 of its potential returns per unit of risk. Strategic Advisers Small Mid is currently generating about 0.01 per unit of risk. If you would invest  877.00  in Aggressive Growth Allocation on January 31, 2025 and sell it today you would earn a total of  235.00  from holding Aggressive Growth Allocation or generate 26.8% return on investment over 90 days.

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

Aggressive Growth Allocation  vs.  Strategic Advisers Small Mid

Aggressive Growth

Risk-Adjusted Performance

Very Weak

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

Strategic Advisers

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aggressive Growth and Strategic Advisers

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

The idea behind Aggressive Growth Allocation and Strategic Advisers Small Mid 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.