Correlation Between New Perspective and Sands Capital
Can any of the company-specific risk be diversified away by investing in both New Perspective and Sands Capital 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 Sands Capital 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 Sands Capital Global, you can compare the effects of market volatilities on New Perspective and Sands Capital 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 Sands Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and Sands Capital.
Diversification Opportunities for New Perspective and Sands Capital
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Sands is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and Sands Capital Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sands Capital Global 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 Sands Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sands Capital Global has no effect on the direction of New Perspective i.e., New Perspective and Sands Capital go up and down completely randomly.
Pair Corralation between New Perspective and Sands Capital
Assuming the 90 days horizon New Perspective is expected to generate 36.43 times less return on investment than Sands Capital. But when comparing it to its historical volatility, New Perspective Fund is 1.25 times less risky than Sands Capital. It trades about 0.01 of its potential returns per unit of risk. Sands Capital Global is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 3,112 in Sands Capital Global on August 30, 2024 and sell it today you would earn a total of 221.00 from holding Sands Capital Global or generate 7.1% 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. Sands Capital Global
Performance |
| Timeline |
| New Perspective |
| Sands Capital Global |
New Perspective and Sands Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and Sands Capital
The main advantage of trading using opposite New Perspective and Sands Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective position performs unexpectedly, Sands Capital 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 Sands Capital will offset losses from the drop in Sands Capital'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 |
| Sands Capital vs. Sands Capital Global | Sands Capital vs. Invesco Disciplined Equity | Sands Capital vs. Global Advantage Portfolio | Sands Capital vs. Global Opportunity 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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