Correlation Between New Perspective and Oak Ridge
Can any of the company-specific risk be diversified away by investing in both New Perspective and Oak Ridge 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 Perspective and Oak Ridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Perspective Fund and Oak Ridge Small, you can compare the effects of market volatilities on New Perspective and Oak Ridge 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 Perspective with a short position of Oak Ridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Perspective and Oak Ridge.
Diversification Opportunities for New Perspective and Oak Ridge
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between New and Oak is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding New Perspective Fund and Oak Ridge Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oak Ridge Small and New Perspective 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 Perspective Fund are associated (or correlated) with Oak Ridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oak Ridge Small has no effect on the direction of New Perspective i.e., New Perspective and Oak Ridge go up and down completely randomly.
Pair Corralation between New Perspective and Oak Ridge
Assuming the 90 days horizon New Perspective Fund is expected to generate 0.84 times more return on investment than Oak Ridge. However, New Perspective Fund is 1.19 times less risky than Oak Ridge. It trades about 0.02 of its potential returns per unit of risk. Oak Ridge Small is currently generating about -0.08 per unit of risk. If you would invest 6,300 in New Perspective Fund on December 27, 2024 and sell it today you would earn a total of 41.00 from holding New Perspective Fund or generate 0.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
New Perspective Fund vs. Oak Ridge Small
Performance |
Timeline |
New Perspective |
Oak Ridge Small |
New Perspective and Oak Ridge Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with New Perspective and Oak Ridge
The main advantage of trading using opposite New Perspective and Oak Ridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Perspective position performs unexpectedly, Oak Ridge 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 Oak Ridge will offset losses from the drop in Oak Ridge's long position.New Perspective vs. Prudential High Yield | New Perspective vs. Barings High Yield | New Perspective vs. Access Flex High | New Perspective vs. Ab High Income |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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