Correlation Between World Energy and China Fund
Can any of the company-specific risk be diversified away by investing in both World Energy and China 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 World Energy and China Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between World Energy Fund and China Fund, you can compare the effects of market volatilities on World Energy and China 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 World Energy with a short position of China Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of World Energy and China Fund.
Diversification Opportunities for World Energy and China Fund
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between World and China is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding World Energy Fund and China Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Fund and World Energy 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 Energy Fund are associated (or correlated) with China Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Fund has no effect on the direction of World Energy i.e., World Energy and China Fund go up and down completely randomly.
Pair Corralation between World Energy and China Fund
Assuming the 90 days horizon World Energy Fund is expected to generate 0.65 times more return on investment than China Fund. However, World Energy Fund is 1.53 times less risky than China Fund. It trades about 0.07 of its potential returns per unit of risk. China Fund is currently generating about -0.06 per unit of risk. If you would invest 1,384 in World Energy Fund on November 1, 2024 and sell it today you would earn a total of 110.00 from holding World Energy Fund or generate 7.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
World Energy Fund vs. China Fund
Performance |
| Timeline |
| World Energy |
| China Fund |
World Energy and China Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with World Energy and China Fund
The main advantage of trading using opposite World Energy and China Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if World Energy position performs unexpectedly, China 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 China Fund will offset losses from the drop in China Fund's long position.| World Energy vs. Barings High Yield | World Energy vs. Old Westbury Fixed | World Energy vs. Ab Bond Inflation | World Energy vs. Ab Bond Inflation |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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