Correlation Between New Perspective and Cars
Can any of the company-specific risk be diversified away by investing in both New Perspective and Cars 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 Perspective and Cars into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Perspective Fund and Cars Inc, you can compare the effects of market volatilities on New Perspective and Cars 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 Perspective with a short position of Cars. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and Cars.
Diversification Opportunities for New Perspective and Cars
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between New and Cars is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and Cars Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cars Inc and New Perspective 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 Perspective Fund are associated (or correlated) with Cars. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cars Inc has no effect on the direction of New Perspective i.e., New Perspective and Cars go up and down completely randomly.
Pair Corralation between New Perspective and Cars
Assuming the 90 days horizon New Perspective Fund is expected to generate 0.21 times more return on investment than Cars. However, New Perspective Fund is 4.86 times less risky than Cars. It trades about -0.02 of its potential returns per unit of risk. Cars Inc is currently generating about -0.25 per unit of risk. If you would invest 6,419 in New Perspective Fund on December 27, 2024 and sell it today you would lose (75.00) from holding New Perspective Fund or give up 1.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 66.67% |
| Values | Daily Returns |
New Perspective Fund vs. Cars Inc
Performance |
| Timeline |
| New Perspective |
| Cars Inc |
New Perspective and Cars Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and Cars
The main advantage of trading using opposite New Perspective and Cars positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective position performs unexpectedly, Cars 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 Cars will offset losses from the drop in Cars' long position.| New Perspective vs. Growth Fund Of | New Perspective vs. American Funds Fundamental | New Perspective vs. Investment Of America | New Perspective vs. Smallcap World Fund |
| Cars vs. Nordic Semiconductor ASA | Cars vs. Solstad Offshore ASA | Cars vs. Eastinco Mining Exploration | Cars vs. Hecla Mining Co |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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