Correlation Between New Perspective and Us Government
Can any of the company-specific risk be diversified away by investing in both New Perspective 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 Perspective 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 Perspective Fund and Us Government Securities, you can compare the effects of market volatilities on New Perspective 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 Perspective with a short position of Us Government. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and Us Government.
Diversification Opportunities for New Perspective and Us Government
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and AMUSX is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective 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 Perspective 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 Perspective 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 Perspective i.e., New Perspective and Us Government go up and down completely randomly.
Pair Corralation between New Perspective and Us Government
Assuming the 90 days horizon New Perspective Fund is expected to generate 1.86 times more return on investment than Us Government. However, New Perspective is 1.86 times more volatile than Us Government Securities. It trades about 0.09 of its potential returns per unit of risk. Us Government Securities is currently generating about 0.01 per unit of risk. If you would invest 4,654 in New Perspective Fund on August 24, 2024 and sell it today you would earn a total of 1,903 from holding New Perspective Fund or generate 40.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Perspective Fund vs. Us Government Securities
Performance |
| Timeline |
| New Perspective |
| Us Government Securities |
New Perspective and Us Government Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Perspective and Us Government
The main advantage of trading using opposite New Perspective and Us Government positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective 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 Perspective vs. Washington Mutual Investors | New Perspective vs. American Balanced Fund | New Perspective vs. New World Fund | New Perspective vs. Europacific Growth Fund |
| Us Government vs. Vanguard Gnma Fund | Us Government vs. Us Government Securities | Us Government vs. Us Government Securities | Us Government vs. American Funds Government |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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