Correlation Between New World and Short Term
Can any of the company-specific risk be diversified away by investing in both New World and Short Term 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 Short Term 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 Short Term Bond Fund, you can compare the effects of market volatilities on New World and Short Term 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 Short Term. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Short Term.
Diversification Opportunities for New World and Short Term
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between New and Short is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Short Term Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Short Term Bond 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 Short Term. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Short Term Bond has no effect on the direction of New World i.e., New World and Short Term go up and down completely randomly.
Pair Corralation between New World and Short Term
Assuming the 90 days horizon New World Fund is expected to generate 5.51 times more return on investment than Short Term. However, New World is 5.51 times more volatile than Short Term Bond Fund. It trades about 0.08 of its potential returns per unit of risk. Short Term Bond Fund is currently generating about 0.22 per unit of risk. If you would invest 8,016 in New World Fund on September 13, 2024 and sell it today you would earn a total of 70.00 from holding New World Fund or generate 0.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Short Term Bond Fund
Performance |
| Timeline |
| New World Fund |
| Short Term Bond |
New World and Short Term Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Short Term
The main advantage of trading using opposite New World and Short Term positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Short Term 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 Short Term will offset losses from the drop in Short Term's long position.| New World vs. Easterly Snow Longshort | New World vs. Prudential Short Duration | New World vs. Rbc Short Duration | New World vs. Quantitative Longshort Equity |
| Short Term vs. Alternative Asset Allocation | Short Term vs. Aqr Large Cap | Short Term vs. Washington Mutual Investors | Short Term vs. Pace Large 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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