Correlation Between Global Technology and New Economy
Can any of the company-specific risk be diversified away by investing in both Global Technology 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 Global Technology and New Economy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Technology Portfolio and New Economy Fund, you can compare the effects of market volatilities on Global Technology 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 Global Technology with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Technology and New Economy.
Diversification Opportunities for Global Technology and New Economy
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Global and New is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Global Technology Portfolio 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 Global Technology 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 Global Technology Portfolio 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 Global Technology i.e., Global Technology and New Economy go up and down completely randomly.
Pair Corralation between Global Technology and New Economy
Assuming the 90 days horizon Global Technology Portfolio is expected to generate 1.13 times more return on investment than New Economy. However, Global Technology is 1.13 times more volatile than New Economy Fund. It trades about 0.23 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.18 per unit of risk. If you would invest 2,027 in Global Technology Portfolio on September 1, 2024 and sell it today you would earn a total of 95.00 from holding Global Technology Portfolio or generate 4.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Technology Portfolio vs. New Economy Fund
Performance |
| Timeline |
| Global Technology |
| New Economy Fund |
Global Technology and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Technology and New Economy
The main advantage of trading using opposite Global Technology and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Technology 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.| Global Technology vs. Adams Diversified Equity | Global Technology vs. Fidelity Advisor Diversified | Global Technology vs. Western Asset Diversified | Global Technology vs. Harbor Diversified International |
| New Economy vs. Qs Small Capitalization | New Economy vs. Small Pany Growth | New Economy vs. Champlain Small | New Economy vs. The Hartford Small |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |