Correlation Between New World and Harding Loevner
Can any of the company-specific risk be diversified away by investing in both New World and Harding Loevner 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 Harding Loevner 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 Harding Loevner Frontier, you can compare the effects of market volatilities on New World and Harding Loevner 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 Harding Loevner. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Harding Loevner.
Diversification Opportunities for New World and Harding Loevner
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Harding is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Harding Loevner Frontier in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harding Loevner Frontier 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 Harding Loevner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harding Loevner Frontier has no effect on the direction of New World i.e., New World and Harding Loevner go up and down completely randomly.
Pair Corralation between New World and Harding Loevner
Assuming the 90 days horizon New World Fund is expected to under-perform the Harding Loevner. In addition to that, New World is 1.67 times more volatile than Harding Loevner Frontier. It trades about -0.21 of its total potential returns per unit of risk. Harding Loevner Frontier is currently generating about -0.24 per unit of volatility. If you would invest 831.00 in Harding Loevner Frontier on August 30, 2024 and sell it today you would lose (17.00) from holding Harding Loevner Frontier or give up 2.05% 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. Harding Loevner Frontier
Performance |
| Timeline |
| New World Fund |
| Harding Loevner Frontier |
New World and Harding Loevner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Harding Loevner
The main advantage of trading using opposite New World and Harding Loevner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Harding Loevner 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 Harding Loevner will offset losses from the drop in Harding Loevner's long position.| New World vs. Smallcap World Fund | New World vs. Investment Of America | New World vs. Europacific Growth Fund | New World vs. Capital World Growth |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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