Correlation Between Us Government and New Perspective
Can any of the company-specific risk be diversified away by investing in both Us Government and New Perspective 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 Us Government and New Perspective into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Us Government Securities and New Perspective Fund, you can compare the effects of market volatilities on Us Government and New Perspective 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 Us Government with a short position of New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Us Government and New Perspective.
Diversification Opportunities for Us Government and New Perspective
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between AMUSX and NEW is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Us Government Securities and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective and Us Government 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 Us Government Securities are associated (or correlated) with New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Us Government i.e., Us Government and New Perspective go up and down completely randomly.
Pair Corralation between Us Government and New Perspective
Assuming the 90 days horizon Us Government Securities is expected to under-perform the New Perspective. But the mutual fund apears to be less risky and, when comparing its historical volatility, Us Government Securities is 1.96 times less risky than New Perspective. The mutual fund trades about 0.0 of its potential returns per unit of risk. The New Perspective Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,857 in New Perspective Fund on August 26, 2024 and sell it today you would earn a total of 1,250 from holding New Perspective Fund or generate 25.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Us Government Securities vs. New Perspective Fund
Performance |
| Timeline |
| Us Government Securities |
| New Perspective |
Us Government and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Us Government and New Perspective
The main advantage of trading using opposite Us Government and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Us Government position performs unexpectedly, New Perspective 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 Perspective will offset losses from the drop in New Perspective's long position.| Us Government vs. Bond Fund Of | Us Government vs. Capital World Bond | Us Government vs. American Mutual Fund | Us Government vs. Smallcap World Fund |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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