Correlation Between Target Retirement and New Economy
Can any of the company-specific risk be diversified away by investing in both Target Retirement and New Economy 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 Target Retirement and New Economy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Target Retirement 2040 and New Economy Fund, you can compare the effects of market volatilities on Target Retirement and New Economy 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 Target Retirement with a short position of New Economy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Target Retirement and New Economy.
Diversification Opportunities for Target Retirement and New Economy
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Target and New is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Target Retirement 2040 and New Economy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Economy Fund and Target Retirement 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 Target Retirement 2040 are associated (or correlated) with New Economy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Economy Fund has no effect on the direction of Target Retirement i.e., Target Retirement and New Economy go up and down completely randomly.
Pair Corralation between Target Retirement and New Economy
Assuming the 90 days horizon Target Retirement is expected to generate 1.15 times less return on investment than New Economy. But when comparing it to its historical volatility, Target Retirement 2040 is 2.17 times less risky than New Economy. It trades about 0.1 of its potential returns per unit of risk. New Economy Fund is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4,821 in New Economy Fund on November 3, 2024 and sell it today you would earn a total of 405.00 from holding New Economy Fund or generate 8.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Target Retirement 2040 vs. New Economy Fund
Performance |
| Timeline |
| Target Retirement 2040 |
| New Economy Fund |
Target Retirement and New Economy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Target Retirement and New Economy
The main advantage of trading using opposite Target Retirement and New Economy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Target Retirement position performs unexpectedly, New Economy 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 Economy will offset losses from the drop in New Economy's long position.| Target Retirement vs. Ashmore Emerging Markets | Target Retirement vs. Mid Cap 15x Strategy | Target Retirement vs. Investec Emerging Markets | Target Retirement vs. Aqr Tm Emerging |
| New Economy vs. Oppenheimer Gold Special | New Economy vs. International Investors Gold | New Economy vs. First Eagle Gold | New Economy vs. Gold Portfolio Fidelity |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
Other Complementary Tools
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Stocks Directory Find actively traded stocks across global markets | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance |