Correlation Between New Perspective and Small-cap Value
Can any of the company-specific risk be diversified away by investing in both New Perspective and Small-cap Value 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 Small-cap Value 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 Small Cap Value Profund, you can compare the effects of market volatilities on New Perspective and Small-cap Value 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 Small-cap Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and Small-cap Value.
Diversification Opportunities for New Perspective and Small-cap Value
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Small-cap is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and Small Cap Value Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value 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 Small-cap Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of New Perspective i.e., New Perspective and Small-cap Value go up and down completely randomly.
Pair Corralation between New Perspective and Small-cap Value
Assuming the 90 days horizon New Perspective is expected to generate 2.33 times less return on investment than Small-cap Value. But when comparing it to its historical volatility, New Perspective Fund is 1.17 times less risky than Small-cap Value. It trades about 0.05 of its potential returns per unit of risk. Small Cap Value Profund is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 8,597 in Small Cap Value Profund on October 23, 2024 and sell it today you would earn a total of 122.00 from holding Small Cap Value Profund or generate 1.42% 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. Small Cap Value Profund
Performance |
| Timeline |
| New Perspective |
| Small Cap Value |
New Perspective and Small-cap Value Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and Small-cap Value
The main advantage of trading using opposite New Perspective and Small-cap Value positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective position performs unexpectedly, Small-cap Value 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 Small-cap Value will offset losses from the drop in Small-cap Value'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 |
| Small-cap Value vs. Real Estate Ultrasector | Small-cap Value vs. Short Real Estate | Small-cap Value vs. Ultrashort Mid Cap Profund | Small-cap Value vs. Ultrashort Mid Cap Profund |
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 Managers module to screen money managers from public funds and ETFs managed around the world.
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