Correlation Between New Perspective and China Railway
Can any of the company-specific risk be diversified away by investing in both New Perspective and China Railway 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 China Railway 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 China Railway Group, you can compare the effects of market volatilities on New Perspective and China Railway 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 China Railway. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and China Railway.
Diversification Opportunities for New Perspective and China Railway
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between New and China is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and China Railway Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Railway Group 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 China Railway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Railway Group has no effect on the direction of New Perspective i.e., New Perspective and China Railway go up and down completely randomly.
Pair Corralation between New Perspective and China Railway
Assuming the 90 days horizon New Perspective is expected to generate 7.8 times less return on investment than China Railway. But when comparing it to its historical volatility, New Perspective Fund is 6.88 times less risky than China Railway. It trades about 0.06 of its potential returns per unit of risk. China Railway Group is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 22.00 in China Railway Group on November 3, 2024 and sell it today you would earn a total of 23.00 from holding China Railway Group or generate 104.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 98.41% |
| Values | Daily Returns |
New Perspective Fund vs. China Railway Group
Performance |
| Timeline |
| New Perspective |
| China Railway Group |
New Perspective and China Railway Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and China Railway
The main advantage of trading using opposite New Perspective and China Railway positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective position performs unexpectedly, China Railway 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 China Railway will offset losses from the drop in China Railway'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 |
| China Railway vs. The Hanover Insurance | China Railway vs. VIENNA INSURANCE GR | China Railway vs. De Grey Mining | China Railway vs. REVO INSURANCE SPA |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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