Correlation Between New World and State Street
Can any of the company-specific risk be diversified away by investing in both New World and State Street 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 State Street 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 State Street Emerging, you can compare the effects of market volatilities on New World and State Street 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 State Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and State Street.
Diversification Opportunities for New World and State Street
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between New and State is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and State Street Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Street Emerging 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 State Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Street Emerging has no effect on the direction of New World i.e., New World and State Street go up and down completely randomly.
Pair Corralation between New World and State Street
Assuming the 90 days horizon New World Fund is expected to under-perform the State Street. But the mutual fund apears to be less risky and, when comparing its historical volatility, New World Fund is 1.16 times less risky than State Street. The mutual fund trades about -0.09 of its potential returns per unit of risk. The State Street Emerging is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 6,280 in State Street Emerging on January 25, 2024 and sell it today you would lose (3.00) from holding State Street Emerging or give up 0.05% 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. State Street Emerging
Performance |
| Timeline |
| New World Fund |
| State Street Emerging |
New World and State Street Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and State Street
The main advantage of trading using opposite New World and State Street positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, State Street 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 State Street will offset losses from the drop in State Street's long position.| New World vs. Amana Income Fund | New World vs. Amana Growth Fund | New World vs. Amana Participation Fund | New World vs. HUMANA INC |
| State Street vs. Amana Income Fund | State Street vs. Amana Growth Fund | State Street vs. Amana Participation Fund | State Street vs. HUMANA INC |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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