Correlation Between Pear Tree and New World
Can any of the company-specific risk be diversified away by investing in both Pear Tree and New World 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 Pear Tree and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pear Tree Polaris and New World Fund, you can compare the effects of market volatilities on Pear Tree and New World 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 Pear Tree with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pear Tree and New World.
Diversification Opportunities for Pear Tree and New World
Weak diversification
The 3 months correlation between Pear and New is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pear Tree Polaris and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund and Pear Tree 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 Pear Tree Polaris are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Pear Tree i.e., Pear Tree and New World go up and down completely randomly.
Pair Corralation between Pear Tree and New World
Assuming the 90 days horizon Pear Tree Polaris is expected to under-perform the New World. In addition to that, Pear Tree is 1.33 times more volatile than New World Fund. It trades about -0.14 of its total potential returns per unit of risk. New World Fund is currently generating about -0.13 per unit of volatility. If you would invest 8,151 in New World Fund on September 2, 2024 and sell it today you would lose (134.00) from holding New World Fund or give up 1.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pear Tree Polaris vs. New World Fund
Performance |
| Timeline |
| Pear Tree Polaris |
| New World Fund |
Pear Tree and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pear Tree and New World
The main advantage of trading using opposite Pear Tree and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pear Tree position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.| Pear Tree vs. Pear Tree Polaris | Pear Tree vs. Seafarer Overseas Growth | Pear Tree vs. International Fund International | Pear Tree vs. Lazard Global Listed |
| New World vs. Western Asset Inflation | New World vs. American Funds Inflation | New World vs. Ab Bond Inflation | New World vs. Blackrock Inflation Protected |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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