Correlation Between New World and Seafarer Overseas
Can any of the company-specific risk be diversified away by investing in both New World and Seafarer Overseas 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 Seafarer Overseas 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 Seafarer Overseas Growth, you can compare the effects of market volatilities on New World and Seafarer Overseas 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 Seafarer Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Seafarer Overseas.
Diversification Opportunities for New World and Seafarer Overseas
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Seafarer is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Seafarer Overseas Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seafarer Overseas Growth 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 Seafarer Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seafarer Overseas Growth has no effect on the direction of New World i.e., New World and Seafarer Overseas go up and down completely randomly.
Pair Corralation between New World and Seafarer Overseas
Assuming the 90 days horizon New World Fund is expected to generate 0.88 times more return on investment than Seafarer Overseas. However, New World Fund is 1.13 times less risky than Seafarer Overseas. It trades about -0.13 of its potential returns per unit of risk. Seafarer Overseas Growth is currently generating about -0.11 per unit of risk. If you would invest 8,239 in New World Fund on September 2, 2024 and sell it today you would lose (138.00) from holding New World Fund or give up 1.67% 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. Seafarer Overseas Growth
Performance |
| Timeline |
| New World Fund |
| Seafarer Overseas Growth |
New World and Seafarer Overseas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Seafarer Overseas
The main advantage of trading using opposite New World and Seafarer Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Seafarer Overseas 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 Seafarer Overseas will offset losses from the drop in Seafarer Overseas' 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 |
| Seafarer Overseas vs. Alliancebernstein Global High | Seafarer Overseas vs. Legg Mason Partners | Seafarer Overseas vs. Ab Global Risk | Seafarer Overseas vs. Needham Aggressive Growth |
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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