Correlation Between New World and Oaktree Emerging
Can any of the company-specific risk be diversified away by investing in both New World and Oaktree Emerging 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 World and Oaktree Emerging into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New World Fund and Oaktree Emerging Markets, you can compare the effects of market volatilities on New World and Oaktree Emerging 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 World with a short position of Oaktree Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Oaktree Emerging.
Diversification Opportunities for New World and Oaktree Emerging
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Oaktree is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Oaktree Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oaktree Emerging Markets and New 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 New World Fund are associated (or correlated) with Oaktree Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oaktree Emerging Markets has no effect on the direction of New World i.e., New World and Oaktree Emerging go up and down completely randomly.
Pair Corralation between New World and Oaktree Emerging
Assuming the 90 days horizon New World is expected to generate 1.2 times less return on investment than Oaktree Emerging. But when comparing it to its historical volatility, New World Fund is 1.3 times less risky than Oaktree Emerging. It trades about 0.11 of its potential returns per unit of risk. Oaktree Emerging Markets is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 723.00 in Oaktree Emerging Markets on November 4, 2024 and sell it today you would earn a total of 14.00 from holding Oaktree Emerging Markets or generate 1.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Oaktree Emerging Markets
Performance |
| Timeline |
| New World Fund |
| Oaktree Emerging Markets |
New World and Oaktree Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Oaktree Emerging
The main advantage of trading using opposite New World and Oaktree Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Oaktree Emerging 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 Oaktree Emerging will offset losses from the drop in Oaktree Emerging's long position.| New World vs. Glg Intl Small | New World vs. Small Pany Growth | New World vs. Needham Small Cap | New World vs. Smallcap Fund Fka |
| Oaktree Emerging vs. Vanguard Small Cap Value | Oaktree Emerging vs. Fpa Queens Road | Oaktree Emerging vs. Fidelity Small Cap | Oaktree Emerging vs. Ab Small Cap |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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