Correlation Between Commonwealth Real and New Economy
Can any of the company-specific risk be diversified away by investing in both Commonwealth Real and New Economy 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 Commonwealth Real and New Economy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Commonwealth Real Estate and New Economy Fund, you can compare the effects of market volatilities on Commonwealth Real and New Economy 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 Commonwealth Real with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commonwealth Real and New Economy.
Diversification Opportunities for Commonwealth Real and New Economy
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Commonwealth and New is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Real Estate and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund and Commonwealth Real 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 Commonwealth Real Estate are associated (or correlated) with New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Commonwealth Real i.e., Commonwealth Real and New Economy go up and down completely randomly.
Pair Corralation between Commonwealth Real and New Economy
Assuming the 90 days horizon Commonwealth Real is expected to generate 1.05 times less return on investment than New Economy. But when comparing it to its historical volatility, Commonwealth Real Estate is 1.02 times less risky than New Economy. It trades about 0.09 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,290 in New Economy Fund on August 27, 2024 and sell it today you would earn a total of 1,323 from holding New Economy Fund or generate 25.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Commonwealth Real Estate vs. New Economy Fund
Performance |
| Timeline |
| Commonwealth Real Estate |
| New Economy Fund |
Commonwealth Real and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Commonwealth Real and New Economy
The main advantage of trading using opposite Commonwealth Real and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Real position performs unexpectedly, New Economy 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 Economy will offset losses from the drop in New Economy's long position.| Commonwealth Real vs. Commonwealth Global Fund | Commonwealth Real vs. Commonwealth Australianew Zealand | Commonwealth Real vs. Amg Managers Centersquare | Commonwealth Real vs. Commonwealth Japan Fund |
| New Economy vs. Forum Real Estate | New Economy vs. Neuberger Berman Real | New Economy vs. Amg Managers Centersquare | New Economy vs. Commonwealth Real Estate |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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