Correlation Between Energy Basic and New Perspective
Can any of the company-specific risk be diversified away by investing in both Energy Basic and New Perspective 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 Energy Basic and New Perspective into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energy Basic Materials and New Perspective Fund, you can compare the effects of market volatilities on Energy Basic and New Perspective 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 Energy Basic with a short position of New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and New Perspective.
Diversification Opportunities for Energy Basic and New Perspective
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Energy and New is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective and Energy Basic 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 Energy Basic Materials are associated (or correlated) with New Perspective. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Perspective has no effect on the direction of Energy Basic i.e., Energy Basic and New Perspective go up and down completely randomly.
Pair Corralation between Energy Basic and New Perspective
Assuming the 90 days horizon Energy Basic Materials is expected to generate 0.93 times more return on investment than New Perspective. However, Energy Basic Materials is 1.08 times less risky than New Perspective. It trades about 0.13 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.01 per unit of risk. If you would invest 1,144 in Energy Basic Materials on December 28, 2024 and sell it today you would earn a total of 82.00 from holding Energy Basic Materials or generate 7.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Energy Basic Materials vs. New Perspective Fund
Performance |
Timeline |
Energy Basic Materials |
New Perspective |
Energy Basic and New Perspective Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Energy Basic and New Perspective
The main advantage of trading using opposite Energy Basic and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Basic position performs unexpectedly, New Perspective 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 Perspective will offset losses from the drop in New Perspective's long position.Energy Basic vs. Salient Alternative Beta | Energy Basic vs. Salient Alternative Beta | Energy Basic vs. Salient Mlp Fund | Energy Basic vs. Moderately Aggressive Balanced |
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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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