Correlation Between New World and American Funds
Can any of the company-specific risk be diversified away by investing in both New World and American Funds 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 American Funds 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 American Funds Retirement, you can compare the effects of market volatilities on New World and American Funds 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 American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and American Funds.
Diversification Opportunities for New World and American Funds
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and American is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and American Funds Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Retirement 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 American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Retirement has no effect on the direction of New World i.e., New World and American Funds go up and down completely randomly.
Pair Corralation between New World and American Funds
Assuming the 90 days horizon New World Fund is expected to under-perform the American Funds. In addition to that, New World is 1.89 times more volatile than American Funds Retirement. It trades about -0.21 of its total potential returns per unit of risk. American Funds Retirement is currently generating about 0.08 per unit of volatility. If you would invest 1,278 in American Funds Retirement on August 30, 2024 and sell it today you would earn a total of 8.00 from holding American Funds Retirement or generate 0.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
New World Fund vs. American Funds Retirement
Performance |
| Timeline |
| New World Fund |
| American Funds Retirement |
New World and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and American Funds
The main advantage of trading using opposite New World and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| New World vs. Doubleline E Fixed | New World vs. Locorr Dynamic Equity | New World vs. Fisher Fixed Income | New World vs. Touchstone International Equity |
| American Funds vs. Pioneer Diversified High | American Funds vs. Huber Capital Diversified | American Funds vs. Pgim Conservative Retirement | American Funds vs. Western Asset Diversified |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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