Correlation Between International Growth and New Perspective
Can any of the company-specific risk be diversified away by investing in both International Growth and New Perspective 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 International Growth and New Perspective into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Growth Fund and New Perspective Fund, you can compare the effects of market volatilities on International Growth and New Perspective 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 International Growth with a short position of New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Growth and New Perspective.
Diversification Opportunities for International Growth and New Perspective
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between International and New is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding International Growth Fund and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective and International Growth 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 International Growth Fund are associated (or correlated) with New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of International Growth i.e., International Growth and New Perspective go up and down completely randomly.
Pair Corralation between International Growth and New Perspective
Assuming the 90 days horizon International Growth Fund is expected to under-perform the New Perspective. In addition to that, International Growth is 1.1 times more volatile than New Perspective Fund. It trades about -0.16 of its total potential returns per unit of risk. New Perspective Fund is currently generating about 0.02 per unit of volatility. If you would invest 6,431 in New Perspective Fund on August 25, 2024 and sell it today you would earn a total of 21.00 from holding New Perspective Fund or generate 0.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
International Growth Fund vs. New Perspective Fund
Performance |
| Timeline |
| International Growth |
| New Perspective |
International Growth and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with International Growth and New Perspective
The main advantage of trading using opposite International Growth and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Growth position performs unexpectedly, New Perspective 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 New Perspective will offset losses from the drop in New Perspective's long position.| International Growth vs. Value Fund Investor | International Growth vs. Ultra Fund Investor | International Growth vs. Growth Fund Investor | International Growth vs. Select Fund Investor |
| New Perspective vs. Gmo High Yield | New Perspective vs. Virtus High Yield | New Perspective vs. Lord Abbett High | New Perspective vs. Guggenheim High Yield |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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