Correlation Between New Economy and Short-term Bond
Can any of the company-specific risk be diversified away by investing in both New Economy and Short-term Bond 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-term Bond 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 Term Bond Fund, you can compare the effects of market volatilities on New Economy and Short-term Bond 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-term Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Economy and Short-term Bond.
Diversification Opportunities for New Economy and Short-term Bond
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Short-term is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding New Economy Fund and Short Term Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Bond 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-term Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Bond has no effect on the direction of New Economy i.e., New Economy and Short-term Bond go up and down completely randomly.
Pair Corralation between New Economy and Short-term Bond
Assuming the 90 days horizon New Economy Fund is expected to generate 8.91 times more return on investment than Short-term Bond. However, New Economy is 8.91 times more volatile than Short Term Bond Fund. It trades about 0.2 of its potential returns per unit of risk. Short Term Bond Fund is currently generating about -0.05 per unit of risk. If you would invest 6,584 in New Economy Fund on September 4, 2024 and sell it today you would earn a total of 239.00 from holding New Economy Fund or generate 3.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Economy Fund vs. Short Term Bond Fund
Performance |
| Timeline |
| New Economy Fund |
| Short Term Bond |
New Economy and Short-term Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Economy and Short-term Bond
The main advantage of trading using opposite New Economy and Short-term Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Economy position performs unexpectedly, Short-term Bond 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-term Bond will offset losses from the drop in Short-term Bond'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-term Bond vs. Lord Abbett High | Short-term Bond vs. Pace High Yield | Short-term Bond vs. T Rowe Price | Short-term Bond vs. Artisan High Income |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |