Correlation Between New World and Sit Developing
Can any of the company-specific risk be diversified away by investing in both New World and Sit Developing 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 Sit Developing 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 Sit Developing Markets, you can compare the effects of market volatilities on New World and Sit Developing 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 Sit Developing. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Sit Developing.
Diversification Opportunities for New World and Sit Developing
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and Sit is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Sit Developing Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sit Developing 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 Sit Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sit Developing Markets has no effect on the direction of New World i.e., New World and Sit Developing go up and down completely randomly.
Pair Corralation between New World and Sit Developing
Assuming the 90 days horizon New World is expected to generate 5.12 times less return on investment than Sit Developing. But when comparing it to its historical volatility, New World Fund is 1.43 times less risky than Sit Developing. It trades about 0.01 of its potential returns per unit of risk. Sit Developing Markets is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,664 in Sit Developing Markets on September 1, 2024 and sell it today you would earn a total of 108.00 from holding Sit Developing Markets or generate 6.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
New World Fund vs. Sit Developing Markets
Performance |
| Timeline |
| New World Fund |
| Sit Developing Markets |
New World and Sit Developing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Sit Developing
The main advantage of trading using opposite New World and Sit Developing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Sit Developing 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 Sit Developing will offset losses from the drop in Sit Developing's long position.| New World vs. Smallcap World Fund | New World vs. Capital World Growth | New World vs. American Funds Fundamental | New World vs. Capital Income Builder |
| Sit Developing vs. Sit Small Cap | Sit Developing vs. Sit Global Dividend | Sit Developing vs. Sit Global Dividend | Sit Developing vs. Sit 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |