Correlation Between New World and Gmo Emerging
Can any of the company-specific risk be diversified away by investing in both New World and Gmo 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 Gmo 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 Gmo Emerging Markets, you can compare the effects of market volatilities on New World and Gmo 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 Gmo Emerging. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Gmo Emerging.
Diversification Opportunities for New World and Gmo Emerging
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between New and Gmo is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding New World Fund and Gmo Emerging Markets in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gmo 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 Gmo Emerging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gmo Emerging Markets has no effect on the direction of New World i.e., New World and Gmo Emerging go up and down completely randomly.
Pair Corralation between New World and Gmo Emerging
Assuming the 90 days horizon New World Fund is expected to under-perform the Gmo Emerging. In addition to that, New World is 1.04 times more volatile than Gmo Emerging Markets. It trades about -0.09 of its total potential returns per unit of risk. Gmo Emerging Markets is currently generating about 0.03 per unit of volatility. If you would invest 2,387 in Gmo Emerging Markets on January 25, 2024 and sell it today you would earn a total of 8.00 from holding Gmo Emerging Markets or generate 0.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Fund vs. Gmo Emerging Markets
Performance |
| Timeline |
| New World Fund |
| Gmo Emerging Markets |
New World and Gmo Emerging Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Gmo Emerging
The main advantage of trading using opposite New World and Gmo Emerging positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Gmo 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 Gmo Emerging will offset losses from the drop in Gmo Emerging'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 |
| Gmo Emerging vs. Amana Income Fund | Gmo Emerging vs. Amana Growth Fund | Gmo Emerging vs. Amana Participation Fund | Gmo Emerging 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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