Correlation Between New Perspective and Boston Trust
Can any of the company-specific risk be diversified away by investing in both New Perspective and Boston Trust 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 Boston Trust 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 Boston Trust Asset, you can compare the effects of market volatilities on New Perspective and Boston Trust 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 Boston Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and Boston Trust.
Diversification Opportunities for New Perspective and Boston Trust
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Boston is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and Boston Trust Asset in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Trust Asset 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 Boston Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Trust Asset has no effect on the direction of New Perspective i.e., New Perspective and Boston Trust go up and down completely randomly.
Pair Corralation between New Perspective and Boston Trust
Assuming the 90 days horizon New Perspective Fund is expected to generate 1.35 times more return on investment than Boston Trust. However, New Perspective is 1.35 times more volatile than Boston Trust Asset. It trades about 0.05 of its potential returns per unit of risk. Boston Trust Asset is currently generating about 0.03 per unit of risk. If you would invest 6,302 in New Perspective Fund on October 22, 2024 and sell it today you would earn a total of 37.00 from holding New Perspective Fund or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Perspective Fund vs. Boston Trust Asset
Performance |
| Timeline |
| New Perspective |
| Boston Trust Asset |
New Perspective and Boston Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and Boston Trust
The main advantage of trading using opposite New Perspective and Boston Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective position performs unexpectedly, Boston Trust 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 Boston Trust will offset losses from the drop in Boston Trust'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 |
| Boston Trust vs. Walden Asset Management | Boston Trust vs. Boston Trust Midcap | Boston Trust vs. Boston Trust Equity | Boston Trust vs. Boston Trust Small |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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