Correlation Between World Growth and World Energy
Can any of the company-specific risk be diversified away by investing in both World Growth and World Energy 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 World Growth and World Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Growth Fund and World Energy Fund, you can compare the effects of market volatilities on World Growth and World Energy 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 World Growth with a short position of World Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Growth and World Energy.
Diversification Opportunities for World Growth and World Energy
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between World and World is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding World Growth Fund and World Energy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Energy and World 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 World Growth Fund are associated (or correlated) with World Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Energy has no effect on the direction of World Growth i.e., World Growth and World Energy go up and down completely randomly.
Pair Corralation between World Growth and World Energy
Assuming the 90 days horizon World Growth is expected to generate 1.05 times less return on investment than World Energy. But when comparing it to its historical volatility, World Growth Fund is 1.64 times less risky than World Energy. It trades about 0.17 of its potential returns per unit of risk. World Energy Fund is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 1,574 in World Energy Fund on June 6, 2025 and sell it today you would earn a total of 107.00 from holding World Energy Fund or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Growth Fund vs. World Energy Fund
Performance |
| Timeline |
| World Growth |
| World Energy |
World Growth and World Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Growth and World Energy
The main advantage of trading using opposite World Growth and World Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Growth position performs unexpectedly, World Energy 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 World Energy will offset losses from the drop in World Energy's long position.| World Growth vs. International Fund International | World Growth vs. Emerging Markets Fund | World Growth vs. Science Technology Fund | World Growth vs. Aggressive Growth Fund |
| World Energy vs. Vanguard Intermediate Term Tax Exempt | World Energy vs. Dodge Global Bond | World Energy vs. Ambrus Core Bond | World Energy vs. Ms Global Fixed |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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