Correlation Between New Perspective and CHINA WATER
Can any of the company-specific risk be diversified away by investing in both New Perspective and CHINA WATER 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 WATER 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 WATER IGR, you can compare the effects of market volatilities on New Perspective and CHINA WATER 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 WATER. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and CHINA WATER.
Diversification Opportunities for New Perspective and CHINA WATER
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between New and CHINA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and CHINA WATER IGR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHINA WATER IGR 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 WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHINA WATER IGR has no effect on the direction of New Perspective i.e., New Perspective and CHINA WATER go up and down completely randomly.
Pair Corralation between New Perspective and CHINA WATER
Assuming the 90 days horizon New Perspective Fund is expected to generate 0.06 times more return on investment than CHINA WATER. However, New Perspective Fund is 17.38 times less risky than CHINA WATER. It trades about 0.27 of its potential returns per unit of risk. CHINA WATER IGR is currently generating about -0.22 per unit of risk. If you would invest 6,202 in New Perspective Fund on November 3, 2024 and sell it today you would earn a total of 280.00 from holding New Perspective Fund or generate 4.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
New Perspective Fund vs. CHINA WATER IGR
Performance |
| Timeline |
| New Perspective |
| CHINA WATER IGR |
New Perspective and CHINA WATER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and CHINA WATER
The main advantage of trading using opposite New Perspective and CHINA WATER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective position performs unexpectedly, CHINA WATER 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 WATER will offset losses from the drop in CHINA WATER'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 WATER vs. Apple Inc | CHINA WATER vs. Apple Inc | CHINA WATER vs. Apple Inc | CHINA WATER vs. Apple Inc |
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 CEOs Directory module to screen CEOs from public companies around the world.
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