Correlation Between NewFunds MAPPS and NewFunds Shariah

Can any of the company-specific risk be diversified away by investing in both NewFunds MAPPS 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 MAPPS 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 MAPPS Growth and NewFunds Shariah Top, you can compare the effects of market volatilities on NewFunds MAPPS 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 MAPPS with a short position of NewFunds Shariah. Check out your portfolio center. Please also check ongoing floating volatility patterns of NewFunds MAPPS and NewFunds Shariah.

Diversification Opportunities for NewFunds MAPPS and NewFunds Shariah

0.5

Correlation Coefficient

NewFunds MAPPS  NewFunds Shariah

Very weak diversification

The 3 months correlation between NewFunds and NewFunds is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding NewFunds MAPPS Growth 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 MAPPS 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 MAPPS Growth 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 MAPPS i.e., NewFunds MAPPS and NewFunds Shariah go up and down completely randomly.

Pair Corralation between NewFunds MAPPS and NewFunds Shariah

Assuming the 90 days trading horizon NewFunds MAPPS is expected to generate 12.95 times less return on investment than NewFunds Shariah. But when comparing it to its historical volatility, NewFunds MAPPS Growth is 1.15 times less risky than NewFunds Shariah. It trades about 0.04 of its potential returns per unit of risk. NewFunds Shariah Top is currently generating about 0.47 of returns per unit of risk over similar time horizon. If you would invest  34,200  in NewFunds Shariah Top on October 23, 2024 and sell it today you would earn a total of  3,100  from holding NewFunds Shariah Top or generate 9.06% return on investment over 90 days.

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

NewFunds MAPPS Growth  vs.  NewFunds Shariah Top

NewFunds MAPPS Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NewFunds MAPPS Growth has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, NewFunds MAPPS 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 MAPPS and NewFunds Shariah

The main advantage of trading using opposite NewFunds MAPPS and NewFunds Shariah positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NewFunds MAPPS 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 MAPPS Growth 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.