Correlation Between New World and Capital World
Can any of the company-specific risk be diversified away by investing in both New World and Capital 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 New World and Capital World 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 Capital World Bond, you can compare the effects of market volatilities on New World and Capital 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 New World with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Capital World.
Diversification Opportunities for New World and Capital World
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between New and Capital is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Capital World Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World 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 Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Bond has no effect on the direction of New World i.e., New World and Capital World go up and down completely randomly.
Pair Corralation between New World and Capital World
Assuming the 90 days horizon New World Fund is expected to generate 1.89 times more return on investment than Capital World. However, New World is 1.89 times more volatile than Capital World Bond. It trades about 0.06 of its potential returns per unit of risk. Capital World Bond is currently generating about 0.03 per unit of risk. If you would invest 7,131 in New World Fund on September 3, 2024 and sell it today you would earn a total of 793.00 from holding New World Fund or generate 11.12% 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. Capital World Bond
Performance |
| Timeline |
| New World Fund |
| Capital World Bond |
New World and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Capital World
The main advantage of trading using opposite New World and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Capital 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 Capital World will offset losses from the drop in Capital World's long position.| New World vs. Artisan Thematic Fund | New World vs. William Blair Large | New World vs. Rbb Fund | New World vs. Fm Investments Large |
| Capital World vs. Blrc Sgy Mnp | Capital World vs. Touchstone Premium Yield | Capital World vs. Gmo High Yield | Capital World vs. Maryland Tax Free Bond |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope |