Correlation Between New Economy and Short Oil
Can any of the company-specific risk be diversified away by investing in both New Economy and Short Oil 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 New Economy and Short Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Economy Fund and Short Oil Gas, you can compare the effects of market volatilities on New Economy and Short Oil 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 New Economy with a short position of Short Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Economy and Short Oil.
Diversification Opportunities for New Economy and Short Oil
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between New and Short is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding New Economy Fund and Short Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Oil Gas and New Economy 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 New Economy Fund are associated (or correlated) with Short Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Oil Gas has no effect on the direction of New Economy i.e., New Economy and Short Oil go up and down completely randomly.
Pair Corralation between New Economy and Short Oil
Assuming the 90 days horizon New Economy Fund is expected to generate 0.76 times more return on investment than Short Oil. However, New Economy Fund is 1.31 times less risky than Short Oil. It trades about 0.16 of its potential returns per unit of risk. Short Oil Gas is currently generating about -0.31 per unit of risk. If you would invest 5,434 in New Economy Fund on September 2, 2024 and sell it today you would earn a total of 159.00 from holding New Economy Fund or generate 2.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Economy Fund vs. Short Oil Gas
Performance |
| Timeline |
| New Economy Fund |
| Short Oil Gas |
New Economy and Short Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Economy and Short Oil
The main advantage of trading using opposite New Economy and Short Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Economy position performs unexpectedly, Short Oil 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 Short Oil will offset losses from the drop in Short Oil's long position.| New Economy vs. Smallcap World Fund | New Economy vs. New World Fund | New Economy vs. New Perspective Fund | New Economy vs. Investment Of America |
| Short Oil vs. Mutual Of America | Short Oil vs. Ultramid Cap Profund Ultramid Cap | Short Oil vs. Columbia Small Cap | Short Oil vs. Victory Rs Partners |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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