Correlation Between New World and Vaneck Emerging
Can any of the company-specific risk be diversified away by investing in both New World and Vaneck 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 Vaneck 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 Vaneck Emerging Markets, you can compare the effects of market volatilities on New World and Vaneck 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 Vaneck Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Vaneck Emerging.
Diversification Opportunities for New World and Vaneck Emerging
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between New and Vaneck is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Vaneck Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaneck 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 Vaneck Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaneck Emerging Markets has no effect on the direction of New World i.e., New World and Vaneck Emerging go up and down completely randomly.
Pair Corralation between New World and Vaneck Emerging
Assuming the 90 days horizon New World Fund is expected to generate 0.82 times more return on investment than Vaneck Emerging. However, New World Fund is 1.22 times less risky than Vaneck Emerging. It trades about 0.08 of its potential returns per unit of risk. Vaneck Emerging Markets is currently generating about 0.05 per unit of risk. If you would invest 6,962 in New World Fund on September 1, 2024 and sell it today you would earn a total of 1,139 from holding New World Fund or generate 16.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.63% |
| Values | Daily Returns |
New World Fund vs. Vaneck Emerging Markets
Performance |
| Timeline |
| New World Fund |
| Vaneck Emerging Markets |
New World and Vaneck Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Vaneck Emerging
The main advantage of trading using opposite New World and Vaneck Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Vaneck 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 Vaneck Emerging will offset losses from the drop in Vaneck Emerging'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 |
| Vaneck Emerging vs. Unconstrained Emerging Markets | Vaneck Emerging vs. Unconstrained Emerging Markets | Vaneck Emerging vs. Unconstrained Emerging Markets | Vaneck Emerging vs. Emerging Markets Fund |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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