Correlation Between Growth Income and Global Strategy

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

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

Diversification Opportunities for Growth Income and Global Strategy

0.99

Correlation Coefficient

Growth Income  Global Strategy

No risk reduction

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

Pair Corralation between Growth Income and Global Strategy

Assuming the 90 days horizon Growth Income Fund is expected to generate 1.96 times more return on investment than Global Strategy. However, Growth Income is 1.96 times more volatile than Global Strategy Fund. It trades about 0.23 of its potential returns per unit of risk. Global Strategy Fund is currently generating about 0.32 per unit of risk. If you would invest  3,127  in Growth Income Fund on May 2, 2025 and sell it today you would earn a total of  336.00  from holding Growth Income Fund or generate 10.75% return on investment over 90 days.

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

Growth Income Fund  vs.  Global Strategy Fund

Growth Income

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Income Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Growth Income may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Global Strategy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Strategy Fund are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Global Strategy may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Growth Income and Global Strategy

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

The idea behind Growth Income Fund and Global Strategy 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.