Correlation Between New Alternatives and Firsthand Alternative
Can any of the company-specific risk be diversified away by investing in both New Alternatives and Firsthand Alternative 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 New Alternatives and Firsthand Alternative into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Alternatives Fund and Firsthand Alternative Energy, you can compare the effects of market volatilities on New Alternatives and Firsthand Alternative 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 New Alternatives with a short position of Firsthand Alternative. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Alternatives and Firsthand Alternative.
Diversification Opportunities for New Alternatives and Firsthand Alternative
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Firsthand is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding New Alternatives Fund and Firsthand Alternative Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firsthand Alternative and New Alternatives 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 New Alternatives Fund are associated (or correlated) with Firsthand Alternative. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firsthand Alternative has no effect on the direction of New Alternatives i.e., New Alternatives and Firsthand Alternative go up and down completely randomly.
Pair Corralation between New Alternatives and Firsthand Alternative
Assuming the 90 days horizon New Alternatives Fund is expected to under-perform the Firsthand Alternative. But the mutual fund apears to be less risky and, when comparing its historical volatility, New Alternatives Fund is 1.69 times less risky than Firsthand Alternative. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Firsthand Alternative Energy is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,001 in Firsthand Alternative Energy on November 2, 2024 and sell it today you would lose (30.00) from holding Firsthand Alternative Energy or give up 3.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Alternatives Fund vs. Firsthand Alternative Energy
Performance |
| Timeline |
| New Alternatives |
| Firsthand Alternative |
New Alternatives and Firsthand Alternative Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Alternatives and Firsthand Alternative
The main advantage of trading using opposite New Alternatives and Firsthand Alternative positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Alternatives position performs unexpectedly, Firsthand Alternative 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 Firsthand Alternative will offset losses from the drop in Firsthand Alternative's long position.| New Alternatives vs. Guinness Atkinson Alternative | New Alternatives vs. Calvert Global Energy | New Alternatives vs. Portfolio 21 Global | New Alternatives vs. Green Century Balanced |
| Firsthand Alternative vs. Guinness Atkinson Alternative | Firsthand Alternative vs. Calvert Global Energy | Firsthand Alternative vs. New Alternatives Fund | Firsthand Alternative vs. Shelton Green Alpha |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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