Correlation Between American Funds and New World
Can any of the company-specific risk be diversified away by investing in both American Funds 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 American Funds and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds 2025 and New World Fund, you can compare the effects of market volatilities on American Funds 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 American Funds with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and New World.
Diversification Opportunities for American Funds and New World
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and New is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding American Funds 2025 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 American Funds 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 American Funds 2025 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 American Funds i.e., American Funds and New World go up and down completely randomly.
Pair Corralation between American Funds and New World
Assuming the 90 days horizon American Funds 2025 is expected to generate 0.5 times more return on investment than New World. However, American Funds 2025 is 2.02 times less risky than New World. It trades about -0.02 of its potential returns per unit of risk. New World Fund is currently generating about -0.2 per unit of risk. If you would invest 1,589 in American Funds 2025 on August 25, 2024 and sell it today you would lose (2.00) from holding American Funds 2025 or give up 0.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
American Funds 2025 vs. New World Fund
Performance |
| Timeline |
| American Funds 2025 |
| New World Fund |
American Funds and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and New World
The main advantage of trading using opposite American Funds and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds 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.| American Funds vs. Income Fund Of | American Funds vs. New World Fund | American Funds vs. American Mutual Fund | American Funds vs. American Mutual Fund |
| New World vs. Gabelli Gold Fund | New World vs. Europac Gold Fund | New World vs. Goldman Sachs Mlp | New World vs. Oppenheimer Gold Special |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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