Correlation Between New World and Aberdeen Emerging
Can any of the company-specific risk be diversified away by investing in both New World and Aberdeen Emerging 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 Aberdeen Emerging 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 Aberdeen Emerging Markets, you can compare the effects of market volatilities on New World and Aberdeen Emerging 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 Aberdeen Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Aberdeen Emerging.
Diversification Opportunities for New World and Aberdeen Emerging
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between New and Aberdeen is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Aberdeen Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Emerging Markets 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 Aberdeen Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Emerging Markets has no effect on the direction of New World i.e., New World and Aberdeen Emerging go up and down completely randomly.
Pair Corralation between New World and Aberdeen Emerging
Assuming the 90 days horizon New World Fund is expected to generate 0.94 times more return on investment than Aberdeen Emerging. However, New World Fund is 1.07 times less risky than Aberdeen Emerging. It trades about -0.28 of its potential returns per unit of risk. Aberdeen Emerging Markets is currently generating about -0.27 per unit of risk. If you would invest 7,752 in New World Fund on January 20, 2024 and sell it today you would lose (265.00) from holding New World Fund or give up 3.42% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
New World Fund vs. Aberdeen Emerging Markets
Performance |
Timeline |
New World Fund |
Aberdeen Emerging Markets |
New World and Aberdeen Emerging Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with New World and Aberdeen Emerging
The main advantage of trading using opposite New World and Aberdeen Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Aberdeen Emerging 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 Aberdeen Emerging will offset losses from the drop in Aberdeen Emerging's long position.New World vs. Income Fund Of | New World vs. American Mutual Fund | New World vs. American Mutual Fund | New World vs. American Funds Income |
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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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