Correlation Between NewFunds Low and NewFunds Shariah

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

By analyzing existing cross correlation between NewFunds Low Volatility and NewFunds Shariah Top, you can compare the effects of market volatilities on NewFunds Low and NewFunds Shariah 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 NewFunds Low with a short position of NewFunds Shariah. Check out your portfolio center. Please also check ongoing floating volatility patterns of NewFunds Low and NewFunds Shariah.

Diversification Opportunities for NewFunds Low and NewFunds Shariah

0.57

Correlation Coefficient

NewFunds Low  NewFunds Shariah

Very weak diversification

The 3 months correlation between NewFunds and NewFunds is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding NewFunds Low Volatility and NewFunds Shariah Top in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewFunds Shariah Top and NewFunds Low 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 NewFunds Low Volatility are associated (or correlated) with NewFunds Shariah. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewFunds Shariah Top has no effect on the direction of NewFunds Low i.e., NewFunds Low and NewFunds Shariah go up and down completely randomly.

Pair Corralation between NewFunds Low and NewFunds Shariah

Assuming the 90 days trading horizon NewFunds Low Volatility is expected to under-perform the NewFunds Shariah. But the etf apears to be less risky and, when comparing its historical volatility, NewFunds Low Volatility is 2.26 times less risky than NewFunds Shariah. The etf trades about -0.48 of its potential returns per unit of risk. The NewFunds Shariah Top is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  36,300  in NewFunds Shariah Top on October 9, 2024 and sell it today you would lose (1,100) from holding NewFunds Shariah Top or give up 3.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

NewFunds Low Volatility  vs.  NewFunds Shariah Top

NewFunds Low Volatility

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NewFunds Low Volatility has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, NewFunds Low is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

NewFunds Shariah Top

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NewFunds Shariah Top has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NewFunds Shariah is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NewFunds Low and NewFunds Shariah

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

The idea behind NewFunds Low Volatility and NewFunds Shariah Top 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.