Correlation Between Capital World and New World
Can any of the company-specific risk be diversified away by investing in both Capital World and New World 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 Capital World and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital World Bond and New World Fund, you can compare the effects of market volatilities on Capital World and New World 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 Capital World with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital World and New World.
Diversification Opportunities for Capital World and New World
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Capital and New is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Capital World Bond and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund and Capital 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 Capital World Bond are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Capital World i.e., Capital World and New World go up and down completely randomly.
Pair Corralation between Capital World and New World
Assuming the 90 days horizon Capital World is expected to generate 2.86 times less return on investment than New World. But when comparing it to its historical volatility, Capital World Bond is 1.73 times less risky than New World. It trades about 0.12 of its potential returns per unit of risk. New World Fund is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 8,072 in New World Fund on September 14, 2024 and sell it today you would earn a total of 160.00 from holding New World Fund or generate 1.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Capital World Bond vs. New World Fund
Performance |
| Timeline |
| Capital World Bond |
| New World Fund |
Capital World and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital World and New World
The main advantage of trading using opposite Capital World and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital World position performs unexpectedly, New World 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 World will offset losses from the drop in New World's long position.| Capital World vs. New World Fund | Capital World vs. Bond Fund Of | Capital World vs. American High Income | Capital World vs. Europacific Growth Fund |
| New World vs. Smallcap World Fund | New World vs. Investment Of America | New World vs. Europacific Growth Fund | New World vs. Capital World Growth |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device |