Correlation Between Strategic Allocation and New World
Can any of the company-specific risk be diversified away by investing in both Strategic Allocation and New World 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 Strategic Allocation and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Strategic Allocation Moderate and New World Fund, you can compare the effects of market volatilities on Strategic Allocation and New World 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 Strategic Allocation with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Strategic Allocation and New World.
Diversification Opportunities for Strategic Allocation and New World
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Strategic and New is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Allocation Moderate and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund and Strategic Allocation 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 Strategic Allocation Moderate are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Strategic Allocation i.e., Strategic Allocation and New World go up and down completely randomly.
Pair Corralation between Strategic Allocation and New World
Assuming the 90 days horizon Strategic Allocation is expected to generate 109.5 times less return on investment than New World. But when comparing it to its historical volatility, Strategic Allocation Moderate is 1.4 times less risky than New World. It trades about 0.0 of its potential returns per unit of risk. New World Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 7,740 in New World Fund on November 29, 2024 and sell it today you would earn a total of 141.00 from holding New World Fund or generate 1.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Strategic Allocation Moderate vs. New World Fund
Performance |
| Timeline |
| Strategic Allocation |
| New World Fund |
Strategic Allocation and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Strategic Allocation and New World
The main advantage of trading using opposite Strategic Allocation and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Allocation position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.| Strategic Allocation vs. Blackrock All Cap Energy | Strategic Allocation vs. Gamco Natural Resources | Strategic Allocation vs. Transamerica Mlp Energy | Strategic Allocation vs. Clearbridge Energy Mlp |
| New World vs. Rational Strategic Allocation | New World vs. Growth Allocation Fund | New World vs. Knights Of Umbus | New World vs. Hartford Moderate Allocation |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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