Correlation Between New Economy and Intel
Can any of the company-specific risk be diversified away by investing in both New Economy and Intel 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 Economy and Intel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Economy Fund and Intel, you can compare the effects of market volatilities on New Economy and Intel 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 Economy with a short position of Intel. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Economy and Intel.
Diversification Opportunities for New Economy and Intel
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between New and Intel is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding New Economy Fund and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel and New Economy 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 Economy Fund are associated (or correlated) with Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of New Economy i.e., New Economy and Intel go up and down completely randomly.
Pair Corralation between New Economy and Intel
Assuming the 90 days horizon New Economy Fund is expected to generate 0.38 times more return on investment than Intel. However, New Economy Fund is 2.63 times less risky than Intel. It trades about -0.17 of its potential returns per unit of risk. Intel is currently generating about -0.35 per unit of risk. If you would invest 6,006 in New Economy Fund on January 24, 2024 and sell it today you would lose (220.00) from holding New Economy Fund or give up 3.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Economy Fund vs. Intel
Performance |
| Timeline |
| New Economy Fund |
| Intel |
New Economy and Intel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Economy and Intel
The main advantage of trading using opposite New Economy and Intel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Economy position performs unexpectedly, Intel 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 Intel will offset losses from the drop in Intel's long position.| New Economy vs. Income Fund Of | New Economy vs. New World Fund | New Economy vs. American Mutual Fund | New Economy vs. American Mutual Fund |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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