Correlation Between New Economy and The Disciplined
Can any of the company-specific risk be diversified away by investing in both New Economy and The Disciplined 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 The Disciplined 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 The Disciplined Growth, you can compare the effects of market volatilities on New Economy and The Disciplined 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 The Disciplined. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Economy and The Disciplined.
Diversification Opportunities for New Economy and The Disciplined
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between New and The is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding New Economy Fund and The Disciplined Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Disciplined Growth 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 The Disciplined. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Disciplined Growth has no effect on the direction of New Economy i.e., New Economy and The Disciplined go up and down completely randomly.
Pair Corralation between New Economy and The Disciplined
Assuming the 90 days horizon New Economy Fund is expected to generate 0.67 times more return on investment than The Disciplined. However, New Economy Fund is 1.48 times less risky than The Disciplined. It trades about 0.08 of its potential returns per unit of risk. The Disciplined Growth is currently generating about -0.05 per unit of risk. If you would invest 5,951 in New Economy Fund on September 3, 2024 and sell it today you would earn a total of 785.00 from holding New Economy Fund or generate 13.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Economy Fund vs. The Disciplined Growth
Performance |
| Timeline |
| New Economy Fund |
| The Disciplined Growth |
New Economy and The Disciplined Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Economy and The Disciplined
The main advantage of trading using opposite New Economy and The Disciplined positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Economy position performs unexpectedly, The Disciplined 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 The Disciplined will offset losses from the drop in The Disciplined's long position.| New Economy vs. Artisan Small Cap | New Economy vs. Tax Managed Mid Small | New Economy vs. Fisher Small Cap | New Economy vs. Rbb Fund |
| The Disciplined vs. American Funds The | The Disciplined vs. American Funds The | The Disciplined vs. Income Fund Of | The Disciplined vs. Income Fund Of |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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