Correlation Between Growth Fund and Sparta Capital

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

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

Diversification Opportunities for Growth Fund and Sparta Capital

0.13

Correlation Coefficient

Growth Fund  Sparta Capital

Average diversification

The 3 months correlation between Growth and Sparta is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund Of and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital and Growth 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 Growth Fund Of are associated (or correlated) with Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Growth Fund i.e., Growth Fund and Sparta Capital go up and down completely randomly.

Pair Corralation between Growth Fund and Sparta Capital

Assuming the 90 days horizon Growth Fund is expected to generate 35.2 times less return on investment than Sparta Capital. But when comparing it to its historical volatility, Growth Fund Of is 33.33 times less risky than Sparta Capital. It trades about 0.21 of its potential returns per unit of risk. Sparta Capital is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1.21  in Sparta Capital on February 16, 2024 and sell it today you would earn a total of  1.79  from holding Sparta Capital or generate 147.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Growth Fund Of  vs.  Sparta Capital

Growth Fund

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Fund Of are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Growth Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sparta Capital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparta Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sparta Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Growth Fund and Sparta Capital

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

The idea behind Growth Fund Of and Sparta Capital 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.