Correlation Between Income Fund and New World
Can any of the company-specific risk be diversified away by investing in both Income Fund 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 Income Fund and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Fund Of and New World Fund, you can compare the effects of market volatilities on Income Fund 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 Income Fund with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Fund and New World.
Diversification Opportunities for Income Fund and New World
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Income and New is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Of 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 Income 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 Income Fund Of 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 Income Fund i.e., Income Fund and New World go up and down completely randomly.
Pair Corralation between Income Fund and New World
Assuming the 90 days horizon Income Fund Of is expected to generate 0.69 times more return on investment than New World. However, Income Fund Of is 1.45 times less risky than New World. It trades about 0.25 of its potential returns per unit of risk. New World Fund is currently generating about -0.09 per unit of risk. If you would invest 2,571 in Income Fund Of on September 1, 2024 and sell it today you would earn a total of 57.00 from holding Income Fund Of or generate 2.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Income Fund Of vs. New World Fund
Performance |
| Timeline |
| Income Fund |
| New World Fund |
Income Fund and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Fund and New World
The main advantage of trading using opposite Income Fund and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund 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.| Income Fund vs. Capital Income Builder | Income Fund vs. Capital World Growth | Income Fund vs. American Balanced | Income Fund vs. American Funds Fundamental |
| New World vs. Smallcap World Fund | New World vs. Capital World Growth | New World vs. American Funds Fundamental | New World vs. Capital Income Builder |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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