Correlation Between New World and Polar Capital
Can any of the company-specific risk be diversified away by investing in both New World and Polar Capital 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 Polar Capital 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 Polar Capital Emerging, you can compare the effects of market volatilities on New World and Polar Capital 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 Polar Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Polar Capital.
Diversification Opportunities for New World and Polar Capital
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between New and Polar is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Polar Capital Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polar Capital Emerging 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 Polar Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polar Capital Emerging has no effect on the direction of New World i.e., New World and Polar Capital go up and down completely randomly.
Pair Corralation between New World and Polar Capital
Assuming the 90 days horizon New World Fund is expected to under-perform the Polar Capital. But the mutual fund apears to be less risky and, when comparing its historical volatility, New World Fund is 1.45 times less risky than Polar Capital. The mutual fund trades about -0.2 of its potential returns per unit of risk. The Polar Capital Emerging is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest 871.00 in Polar Capital Emerging on August 30, 2024 and sell it today you would lose (45.00) from holding Polar Capital Emerging or give up 5.17% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.73% |
| Values | Daily Returns |
New World Fund vs. Polar Capital Emerging
Performance |
| Timeline |
| New World Fund |
| Polar Capital Emerging |
New World and Polar Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Polar Capital
The main advantage of trading using opposite New World and Polar Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Polar Capital 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 Polar Capital will offset losses from the drop in Polar Capital'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 |
| Polar Capital vs. Ms Global Fixed | Polar Capital vs. Rbc Ultra Short Fixed | Polar Capital vs. The Hartford Equity | Polar Capital vs. Ultra Short Fixed Income |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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