Correlation Between New World and Pear Tree
Can any of the company-specific risk be diversified away by investing in both New World and Pear Tree 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 Pear Tree 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 Pear Tree Polaris, you can compare the effects of market volatilities on New World and Pear Tree 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 Pear Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Pear Tree.
Diversification Opportunities for New World and Pear Tree
Weak diversification
The 3 months correlation between New and Pear is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Pear Tree Polaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pear Tree Polaris 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 Pear Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pear Tree Polaris has no effect on the direction of New World i.e., New World and Pear Tree go up and down completely randomly.
Pair Corralation between New World and Pear Tree
Assuming the 90 days horizon New World Fund is expected to generate 0.84 times more return on investment than Pear Tree. However, New World Fund is 1.19 times less risky than Pear Tree. It trades about -0.18 of its potential returns per unit of risk. Pear Tree Polaris is currently generating about -0.22 per unit of risk. If you would invest 8,154 in New World Fund on August 31, 2024 and sell it today you would lose (215.00) from holding New World Fund or give up 2.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Pear Tree Polaris
Performance |
| Timeline |
| New World Fund |
| Pear Tree Polaris |
New World and Pear Tree Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Pear Tree
The main advantage of trading using opposite New World and Pear Tree positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Pear Tree 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 Pear Tree will offset losses from the drop in Pear Tree's long position.| New World vs. Pear Tree Polaris | New World vs. Artisan High Income | New World vs. HUMANA INC | New World vs. Aquagold International |
| Pear Tree vs. Pear Tree Polaris | Pear Tree vs. Pear Tree Polaris | Pear Tree vs. Artisan International Value | Pear Tree vs. Rondure New World |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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