Correlation Between Cardinal Small and New World

Can any of the company-specific risk be diversified away by investing in both Cardinal Small and New World 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 Cardinal Small and New World into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cardinal Small Cap and New World Fund, you can compare the effects of market volatilities on Cardinal Small and New World 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 Cardinal Small with a short position of New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardinal Small and New World.

Diversification Opportunities for Cardinal Small and New World

0.0

Correlation Coefficient

Cardinal Small  New World

Pay attention - limited upside

The 3 months correlation between Cardinal and New is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cardinal Small Cap and New World Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Fund and Cardinal Small 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 Cardinal Small Cap are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Fund has no effect on the direction of Cardinal Small i.e., Cardinal Small and New World go up and down completely randomly.

Pair Corralation between Cardinal Small and New World

If you would invest  7,655  in New World Fund on December 21, 2024 and sell it today you would earn a total of  248.00  from holding New World Fund or generate 3.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cardinal Small Cap  vs.  New World Fund

Cardinal Small Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cardinal Small Cap has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Cardinal Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

New World Fund

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in New World Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental drivers, New World is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cardinal Small and New World

The main advantage of trading using opposite Cardinal Small and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardinal Small position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.

The idea behind Cardinal Small Cap and New World Fund pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.