Correlation Between New Economy and Us Government
Can any of the company-specific risk be diversified away by investing in both New Economy and Us Government 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 Economy and Us Government into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Economy Fund and Us Government Securities, you can compare the effects of market volatilities on New Economy and Us Government 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 Economy with a short position of Us Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Economy and Us Government.
Diversification Opportunities for New Economy and Us Government
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between New and CGTCX is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding New Economy Fund and Us Government Securities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Government Securities and New Economy 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 Economy Fund are associated (or correlated) with Us Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Government Securities has no effect on the direction of New Economy i.e., New Economy and Us Government go up and down completely randomly.
Pair Corralation between New Economy and Us Government
Assuming the 90 days horizon New Economy Fund is expected to generate 2.51 times more return on investment than Us Government. However, New Economy is 2.51 times more volatile than Us Government Securities. It trades about 0.13 of its potential returns per unit of risk. Us Government Securities is currently generating about 0.07 per unit of risk. If you would invest 4,881 in New Economy Fund on August 24, 2024 and sell it today you would earn a total of 1,909 from holding New Economy Fund or generate 39.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Economy Fund vs. Us Government Securities
Performance |
| Timeline |
| New Economy Fund |
| Us Government Securities |
New Economy and Us Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Economy and Us Government
The main advantage of trading using opposite New Economy and Us Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Economy position performs unexpectedly, Us Government 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 Us Government will offset losses from the drop in Us Government's long position.| New Economy vs. Alger Health Sciences | New Economy vs. Prudential Health Sciences | New Economy vs. Blackrock Health Sciences | New Economy vs. Live Oak Health |
| Us Government vs. Vanguard Gnma Fund | Us Government vs. Us Government Securities | Us Government vs. Us Government Securities | Us Government vs. Vanguard Gnma Fund |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
Other Complementary Tools
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio |