Correlation Between Global Gold and New World
Can any of the company-specific risk be diversified away by investing in both Global Gold and New World 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 Global Gold and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Gold Fund and New World Fund, you can compare the effects of market volatilities on Global Gold and New World 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 Global Gold with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Gold and New World.
Diversification Opportunities for Global Gold and New World
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and New is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Global Gold Fund and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund and Global Gold 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 Global Gold Fund are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Global Gold i.e., Global Gold and New World go up and down completely randomly.
Pair Corralation between Global Gold and New World
Assuming the 90 days horizon Global Gold Fund is expected to under-perform the New World. In addition to that, Global Gold is 3.36 times more volatile than New World Fund. It trades about -0.16 of its total potential returns per unit of risk. New World Fund is currently generating about -0.07 per unit of volatility. If you would invest 7,849 in New World Fund on September 5, 2024 and sell it today you would lose (74.00) from holding New World Fund or give up 0.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Gold Fund vs. New World Fund
Performance |
| Timeline |
| Global Gold Fund |
| New World Fund |
Global Gold and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Gold and New World
The main advantage of trading using opposite Global Gold and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Gold position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.| Global Gold vs. T Rowe Price | Global Gold vs. T Rowe Price | Global Gold vs. T Rowe Price | Global Gold vs. T Rowe Price |
| New World vs. Franklin Gold Precious | New World vs. First Eagle Gold | New World vs. Global Gold Fund | New World vs. Goldman Sachs Short |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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