Correlation Between Capital World and New Economy
Can any of the company-specific risk be diversified away by investing in both Capital World 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 Capital World and New Economy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital World Growth and New Economy Fund, you can compare the effects of market volatilities on Capital World 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 Capital World with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and New Economy.
Diversification Opportunities for Capital World and New Economy
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Capital and New is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Growth 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 Capital World 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 Capital World Growth 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 Capital World i.e., Capital World and New Economy go up and down completely randomly.
Pair Corralation between Capital World and New Economy
Assuming the 90 days horizon Capital World is expected to generate 1.33 times less return on investment than New Economy. But when comparing it to its historical volatility, Capital World Growth is 1.24 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 4,359 in New Economy Fund on August 27, 2024 and sell it today you would earn a total of 2,254 from holding New Economy Fund or generate 51.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Growth vs. New Economy Fund
Performance |
| Timeline |
| Capital World Growth |
| New Economy Fund |
Capital World and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and New Economy
The main advantage of trading using opposite Capital World and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World 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.| Capital World vs. Hennessy Bp Energy | Capital World vs. Dreyfus Natural Resources | Capital World vs. Franklin Natural Resources | Capital World vs. Calvert Global Energy |
| 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities |