Correlation Between New Economy and Intermediate Government
Can any of the company-specific risk be diversified away by investing in both New Economy and Intermediate 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 Intermediate 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 Intermediate Government Bond, you can compare the effects of market volatilities on New Economy and Intermediate 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 Intermediate Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Economy and Intermediate Government.
Diversification Opportunities for New Economy and Intermediate Government
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between New and Intermediate is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding New Economy Fund and Intermediate Government Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intermediate Government 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 Intermediate Government. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intermediate Government has no effect on the direction of New Economy i.e., New Economy and Intermediate Government go up and down completely randomly.
Pair Corralation between New Economy and Intermediate Government
Assuming the 90 days horizon New Economy is expected to generate 2.06 times less return on investment than Intermediate Government. In addition to that, New Economy is 11.56 times more volatile than Intermediate Government Bond. It trades about 0.01 of its total potential returns per unit of risk. Intermediate Government Bond is currently generating about 0.15 per unit of volatility. If you would invest 947.00 in Intermediate Government Bond on September 12, 2024 and sell it today you would earn a total of 2.00 from holding Intermediate Government Bond or generate 0.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Economy Fund vs. Intermediate Government Bond
Performance |
| Timeline |
| New Economy Fund |
| Intermediate Government |
New Economy and Intermediate Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Economy and Intermediate Government
The main advantage of trading using opposite New Economy and Intermediate Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Economy position performs unexpectedly, Intermediate 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 Intermediate Government will offset losses from the drop in Intermediate Government's long position.| New Economy vs. Intermediate Government Bond | New Economy vs. Us Government Securities | New Economy vs. Prudential Government Income | New Economy vs. Dunham Porategovernment Bond |
| Intermediate Government vs. SCOR PK | Intermediate Government vs. Morningstar Unconstrained Allocation | Intermediate Government vs. Via Renewables | Intermediate Government vs. Bondbloxx ETF Trust |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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