Correlation Between New Perspective and Diversified Bond
Can any of the company-specific risk be diversified away by investing in both New Perspective and Diversified 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 Perspective and Diversified Bond 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 Diversified Bond Fund, you can compare the effects of market volatilities on New Perspective and Diversified 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 Perspective with a short position of Diversified Bond. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and Diversified Bond.
Diversification Opportunities for New Perspective and Diversified Bond
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and Diversified is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and Diversified Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diversified Bond 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 Diversified Bond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diversified Bond has no effect on the direction of New Perspective i.e., New Perspective and Diversified Bond go up and down completely randomly.
Pair Corralation between New Perspective and Diversified Bond
Assuming the 90 days horizon New Perspective Fund is expected to generate 2.96 times more return on investment than Diversified Bond. However, New Perspective is 2.96 times more volatile than Diversified Bond Fund. It trades about 0.03 of its potential returns per unit of risk. Diversified Bond Fund is currently generating about 0.02 per unit of risk. If you would invest 6,131 in New Perspective Fund on October 22, 2024 and sell it today you would earn a total of 208.00 from holding New Perspective Fund or generate 3.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Perspective Fund vs. Diversified Bond Fund
Performance |
| Timeline |
| New Perspective |
| Diversified Bond |
New Perspective and Diversified Bond Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and Diversified Bond
The main advantage of trading using opposite New Perspective and Diversified Bond positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective position performs unexpectedly, Diversified 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 Diversified Bond will offset losses from the drop in Diversified Bond's 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 |
| Diversified Bond vs. Morningstar Defensive Bond | Diversified Bond vs. Metropolitan West Porate | Diversified Bond vs. Dreyfusstandish Global Fixed | Diversified Bond vs. Versatile Bond Portfolio |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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