Correlation Between Income Growth and Disciplined Growth
Can any of the company-specific risk be diversified away by investing in both Income Growth and Disciplined 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 Income Growth and Disciplined Growth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Growth Fund and Disciplined Growth Fund, you can compare the effects of market volatilities on Income Growth and Disciplined 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 Income Growth with a short position of Disciplined Growth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Growth and Disciplined Growth.
Diversification Opportunities for Income Growth and Disciplined Growth
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Income and Disciplined is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Income Growth Fund and Disciplined Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Disciplined Growth and Income 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 Income Growth Fund are associated (or correlated) with Disciplined Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Disciplined Growth has no effect on the direction of Income Growth i.e., Income Growth and Disciplined Growth go up and down completely randomly.
Pair Corralation between Income Growth and Disciplined Growth
Assuming the 90 days horizon Income Growth is expected to generate 1.04 times less return on investment than Disciplined Growth. But when comparing it to its historical volatility, Income Growth Fund is 1.43 times less risky than Disciplined Growth. It trades about 0.14 of its potential returns per unit of risk. Disciplined Growth Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,492 in Disciplined Growth Fund on September 7, 2025 and sell it today you would earn a total of 156.00 from holding Disciplined Growth Fund or generate 6.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Growth Fund vs. Disciplined Growth Fund
Performance |
| Timeline |
| Income Growth |
| Disciplined Growth |
Income Growth and Disciplined Growth Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Growth and Disciplined Growth
The main advantage of trading using opposite Income Growth and Disciplined Growth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Growth position performs unexpectedly, Disciplined 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 Disciplined Growth will offset losses from the drop in Disciplined Growth's long position.| Income Growth vs. Intal High Relative | Income Growth vs. Ab Global Risk | Income Growth vs. Aqr Risk Parity | Income Growth vs. Federated Municipal High |
| Disciplined Growth vs. Cutler Equity | Disciplined Growth vs. Legg Mason Partners | Disciplined Growth vs. Rationalrgn Hedged Equity | Disciplined Growth vs. Ab Select Equity |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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