Correlation Between New World and Absolute Convertible
Can any of the company-specific risk be diversified away by investing in both New World and Absolute Convertible 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 Absolute Convertible 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 Absolute Convertible Arbitrage, you can compare the effects of market volatilities on New World and Absolute Convertible 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 Absolute Convertible. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Absolute Convertible.
Diversification Opportunities for New World and Absolute Convertible
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and Absolute is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Absolute Convertible Arbitrage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Absolute Convertible 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 Absolute Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Absolute Convertible has no effect on the direction of New World i.e., New World and Absolute Convertible go up and down completely randomly.
Pair Corralation between New World and Absolute Convertible
Assuming the 90 days horizon New World Fund is expected to generate 14.28 times more return on investment than Absolute Convertible. However, New World is 14.28 times more volatile than Absolute Convertible Arbitrage. It trades about 0.2 of its potential returns per unit of risk. Absolute Convertible Arbitrage is currently generating about 0.84 per unit of risk. If you would invest 7,743 in New World Fund on November 22, 2024 and sell it today you would earn a total of 207.00 from holding New World Fund or generate 2.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Absolute Convertible Arbitrage
Performance |
| Timeline |
| New World Fund |
| Absolute Convertible |
New World and Absolute Convertible Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Absolute Convertible
The main advantage of trading using opposite New World and Absolute Convertible positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Absolute Convertible 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 Absolute Convertible will offset losses from the drop in Absolute Convertible's long position.| New World vs. Enhanced Large Pany | New World vs. Transamerica Asset Allocation | New World vs. Balanced Allocation Fund | New World vs. Tax Managed Large Cap |
| Absolute Convertible vs. Rbc Short Duration | Absolute Convertible vs. Riverpark Short Term | Absolute Convertible vs. Angel Oak Ultrashort | Absolute Convertible vs. Siit Ultra Short |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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