Correlation Between New World and Amana Developing
Can any of the company-specific risk be diversified away by investing in both New World and Amana 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 Amana 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 Amana Developing World, you can compare the effects of market volatilities on New World and Amana 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 Amana Developing. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Amana Developing.
Diversification Opportunities for New World and Amana Developing
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and Amana is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Amana Developing World in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Developing World 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 Amana Developing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Developing World has no effect on the direction of New World i.e., New World and Amana Developing go up and down completely randomly.
Pair Corralation between New World and Amana Developing
Assuming the 90 days horizon New World Fund is expected to generate 1.12 times more return on investment than Amana Developing. However, New World is 1.12 times more volatile than Amana Developing World. It trades about -0.03 of its potential returns per unit of risk. Amana Developing World is currently generating about -0.05 per unit of risk. If you would invest 8,302 in New World Fund on September 12, 2024 and sell it today you would lose (35.00) from holding New World Fund or give up 0.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Amana Developing World
Performance |
| Timeline |
| New World Fund |
| Amana Developing World |
New World and Amana Developing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Amana Developing
The main advantage of trading using opposite New World and Amana Developing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Amana 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 Amana Developing will offset losses from the drop in Amana Developing's long position.| New World vs. American Funds New | New World vs. SCOR PK | New World vs. Morningstar Unconstrained Allocation | New World vs. Via Renewables |
| Amana Developing vs. American Funds New | Amana Developing vs. SCOR PK | Amana Developing vs. Morningstar Unconstrained Allocation | Amana Developing vs. Via Renewables |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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