Correlation Between Focused Dynamic and Growth Fund

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Can any of the company-specific risk be diversified away by investing in both Focused Dynamic 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 Focused Dynamic and Growth Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Focused Dynamic Growth and The Growth Fund, you can compare the effects of market volatilities on Focused Dynamic 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 Focused Dynamic with a short position of Growth Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focused Dynamic and Growth Fund.

Diversification Opportunities for Focused Dynamic and Growth Fund

0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Focused and Growth is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Focused Dynamic Growth and The Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Fund and Focused Dynamic 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 Focused Dynamic Growth 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 has no effect on the direction of Focused Dynamic i.e., Focused Dynamic and Growth Fund go up and down completely randomly.

Pair Corralation between Focused Dynamic and Growth Fund

Assuming the 90 days horizon Focused Dynamic Growth is expected to generate 1.31 times more return on investment than Growth Fund. However, Focused Dynamic is 1.31 times more volatile than The Growth Fund. It trades about -0.09 of its potential returns per unit of risk. The Growth Fund is currently generating about -0.18 per unit of risk. If you would invest  4,168  in Focused Dynamic Growth on April 2, 2022 and sell it today you would lose (248.00)  from holding Focused Dynamic Growth or give up 5.95% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy95.45%
ValuesDaily Returns

Focused Dynamic Growth  vs.  The Growth Fund

 Performance (%) 
      Timeline 
Focused Dynamic Growth 
Focused Performance
0 of 100
Over the last 90 days Focused Dynamic Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in August 2022. The current disturbance may also be a sign of long term up-swing for the fund investors.

Focused Price Channel

Growth Fund 
Growth Performance
0 of 100
Over the last 90 days The Growth Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in August 2022. The current disturbance may also be a sign of long term up-swing for the fund investors.

Growth Price Channel

Focused Dynamic and Growth Fund Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Focused Dynamic and Growth Fund

The main advantage of trading using opposite Focused Dynamic and Growth Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focused Dynamic 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.

Focused Dynamic Growth

Pair trading matchups for Focused Dynamic

International Business vs. Focused Dynamic
GLAXOSMITHKLINE PLC vs. Focused Dynamic
Alphabet vs. Focused Dynamic
Solo Brands vs. Focused Dynamic
Vmware vs. Focused Dynamic
Calyxt vs. Focused Dynamic
MITIE GROUP vs. Focused Dynamic
BP PLC vs. Focused Dynamic
Context Therapeutics vs. Focused Dynamic
Sentinelone Inc vs. Focused Dynamic
RENEWI PLC vs. Focused Dynamic
Alzamend Neuro vs. Focused Dynamic
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Focused Dynamic as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Focused Dynamic's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Focused Dynamic's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Focused Dynamic Growth.
The idea behind Focused Dynamic Growth and The 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.

The Growth Fund

Pair trading matchups for Growth Fund

Liquidia Corp vs. Growth Fund
Visa vs. Growth Fund
MITIE GROUP vs. Growth Fund
Calyxt vs. Growth Fund
Vmware vs. Growth Fund
ATT vs. Growth Fund
Solo Brands vs. Growth Fund
International Business vs. Growth Fund
Novan vs. Growth Fund
RENEWI PLC vs. Growth Fund
Alzamend Neuro vs. Growth Fund
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Growth Fund as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Growth Fund's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Growth Fund's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to The Growth Fund.
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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