Correlation Between Chestnut Street and New Perspective
Can any of the company-specific risk be diversified away by investing in both Chestnut Street and New Perspective 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 Chestnut Street and New Perspective into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chestnut Street Exchange and New Perspective Fund, you can compare the effects of market volatilities on Chestnut Street and New Perspective 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 Chestnut Street with a short position of New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chestnut Street and New Perspective.
Diversification Opportunities for Chestnut Street and New Perspective
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chestnut and New is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Chestnut Street Exchange and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective and Chestnut Street 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 Chestnut Street Exchange are associated (or correlated) with New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Chestnut Street i.e., Chestnut Street and New Perspective go up and down completely randomly.
Pair Corralation between Chestnut Street and New Perspective
Assuming the 90 days horizon Chestnut Street Exchange is expected to generate 1.14 times more return on investment than New Perspective. However, Chestnut Street is 1.14 times more volatile than New Perspective Fund. It trades about 0.11 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.02 per unit of risk. If you would invest 113,881 in Chestnut Street Exchange on August 24, 2024 and sell it today you would earn a total of 2,059 from holding Chestnut Street Exchange or generate 1.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Chestnut Street Exchange vs. New Perspective Fund
Performance |
| Timeline |
| Chestnut Street Exchange |
| New Perspective |
Chestnut Street and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chestnut Street and New Perspective
The main advantage of trading using opposite Chestnut Street and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chestnut Street position performs unexpectedly, New Perspective 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 Perspective will offset losses from the drop in New Perspective's long position.| Chestnut Street vs. Qs Large Cap | Chestnut Street vs. Federated Mdt Large | Chestnut Street vs. Nuveen Winslow Large Cap | Chestnut Street vs. T Rowe Price |
| New Perspective vs. Ubs Money Series | New Perspective vs. Chestnut Street Exchange | New Perspective vs. Usaa Mutual Funds | New Perspective vs. Morgan Stanley Government |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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