Correlation Between New World and Ashmore Emerging
Can any of the company-specific risk be diversified away by investing in both New World and Ashmore 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 Ashmore 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 Ashmore Emerging Markets, you can compare the effects of market volatilities on New World and Ashmore 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 Ashmore Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Ashmore Emerging.
Diversification Opportunities for New World and Ashmore Emerging
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Ashmore is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Ashmore Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashmore 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 Ashmore Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashmore Emerging Markets has no effect on the direction of New World i.e., New World and Ashmore Emerging go up and down completely randomly.
Pair Corralation between New World and Ashmore Emerging
Assuming the 90 days horizon New World Fund is expected to generate 1.01 times more return on investment than Ashmore Emerging. However, New World is 1.01 times more volatile than Ashmore Emerging Markets. It trades about -0.2 of its potential returns per unit of risk. Ashmore Emerging Markets is currently generating about -0.34 per unit of risk. If you would invest 8,558 in New World Fund on August 30, 2024 and sell it today you would lose (463.00) from holding New World Fund or give up 5.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Ashmore Emerging Markets
Performance |
| Timeline |
| New World Fund |
| Ashmore Emerging Markets |
New World and Ashmore Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Ashmore Emerging
The main advantage of trading using opposite New World and Ashmore Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Ashmore 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 Ashmore Emerging will offset losses from the drop in Ashmore Emerging's long position.| New World vs. Vanguard Emerging Markets | New World vs. Vanguard Emerging Markets | New World vs. HUMANA INC | New World vs. Aquagold International |
| Ashmore Emerging vs. T Rowe Price | Ashmore Emerging vs. Wasatch Small Cap | Ashmore Emerging vs. Massmutual Premier Diversified | Ashmore Emerging vs. American Century Diversified |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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