Correlation Between New Alternatives and Small Cap
Can any of the company-specific risk be diversified away by investing in both New Alternatives and Small Cap 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 Small Cap 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 Small Cap Core, you can compare the effects of market volatilities on New Alternatives and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Alternatives and Small Cap.
Diversification Opportunities for New Alternatives and Small Cap
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Small is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding New Alternatives Fund and Small Cap Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Core 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Core has no effect on the direction of New Alternatives i.e., New Alternatives and Small Cap go up and down completely randomly.
Pair Corralation between New Alternatives and Small Cap
Assuming the 90 days horizon New Alternatives Fund is expected to under-perform the Small Cap. But the mutual fund apears to be less risky and, when comparing its historical volatility, New Alternatives Fund is 1.11 times less risky than Small Cap. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Small Cap Core is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,067 in Small Cap Core on August 30, 2024 and sell it today you would earn a total of 444.00 from holding Small Cap Core or generate 41.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Alternatives Fund vs. Small Cap Core
Performance |
| Timeline |
| New Alternatives |
| Small Cap Core |
New Alternatives and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Alternatives and Small Cap
The main advantage of trading using opposite New Alternatives and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Alternatives position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap'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 |
| Small Cap vs. Scharf Global Opportunity | Small Cap vs. Ms Global Fixed | Small Cap vs. Barings Global Floating | Small Cap vs. Ab Global Bond |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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