Correlation Between New Economy and Vanguard
Can any of the company-specific risk be diversified away by investing in both New Economy and Vanguard 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 Vanguard 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 Vanguard Growth Fund, you can compare the effects of market volatilities on New Economy and Vanguard 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 Vanguard. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Economy and Vanguard.
Diversification Opportunities for New Economy and Vanguard
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between New and Vanguard is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding New Economy Fund and Vanguard Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Growth 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 Vanguard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Growth has no effect on the direction of New Economy i.e., New Economy and Vanguard go up and down completely randomly.
Pair Corralation between New Economy and Vanguard
Assuming the 90 days horizon New Economy Fund is expected to generate 0.83 times more return on investment than Vanguard. However, New Economy Fund is 1.2 times less risky than Vanguard. It trades about -0.18 of its potential returns per unit of risk. Vanguard Growth Fund is currently generating about -0.17 per unit of risk. If you would invest 5,998 in New Economy Fund on January 26, 2024 and sell it today you would lose (222.00) from holding New Economy Fund or give up 3.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Economy Fund vs. Vanguard Growth Fund
Performance |
| Timeline |
| New Economy Fund |
| Vanguard Growth |
New Economy and Vanguard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Economy and Vanguard
The main advantage of trading using opposite New Economy and Vanguard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Economy position performs unexpectedly, Vanguard 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 Vanguard will offset losses from the drop in Vanguard's long position.| New Economy vs. American Funds New | New Economy vs. New Perspective Fund | New Economy vs. New Perspective Fund | New Economy vs. New Perspective Fund |
| Vanguard vs. Amana Income Fund | Vanguard vs. Amana Income Fund | Vanguard vs. Amana Developing World | Vanguard vs. Amana Developing World |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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