Correlation Between Moderate Balanced and Dynamic Growth

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

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

Diversification Opportunities for Moderate Balanced and Dynamic Growth

0.99

Correlation Coefficient

Moderate Balanced  Dynamic Growth

No risk reduction

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

Pair Corralation between Moderate Balanced and Dynamic Growth

Assuming the 90 days horizon Moderate Balanced is expected to generate 1.24 times less return on investment than Dynamic Growth. But when comparing it to its historical volatility, Moderate Balanced Allocation is 1.34 times less risky than Dynamic Growth. It trades about 0.25 of its potential returns per unit of risk. Dynamic Growth Fund is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,344  in Dynamic Growth Fund on May 7, 2025 and sell it today you would earn a total of  122.00  from holding Dynamic Growth Fund or generate 9.08% return on investment over 90 days.

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

Moderate Balanced Allocation  vs.  Dynamic Growth Fund

Moderate Balanced

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Moderate Balanced Allocation are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Moderate Balanced may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Dynamic Growth

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Growth Fund are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Dynamic Growth may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Moderate Balanced and Dynamic Growth

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

The idea behind Moderate Balanced Allocation and Dynamic 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.