Correlation Between Ab Global and New Perspective
Can any of the company-specific risk be diversified away by investing in both Ab Global 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 Ab Global and New Perspective into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Global E and New Perspective Fund, you can compare the effects of market volatilities on Ab Global 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 Ab Global with a short position of New Perspective. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Global and New Perspective.
Diversification Opportunities for Ab Global and New Perspective
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GCECX and New is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global E and New Perspective Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Perspective and Ab Global 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 Ab Global E 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 Ab Global i.e., Ab Global and New Perspective go up and down completely randomly.
Pair Corralation between Ab Global and New Perspective
Assuming the 90 days horizon Ab Global is expected to generate 1.34 times less return on investment than New Perspective. But when comparing it to its historical volatility, Ab Global E is 1.11 times less risky than New Perspective. It trades about 0.03 of its potential returns per unit of risk. New Perspective Fund is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,850 in New Perspective Fund on January 19, 2024 and sell it today you would earn a total of 926.00 from holding New Perspective Fund or generate 19.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Global E vs. New Perspective Fund
Performance |
| Timeline |
| Ab Global E |
| New Perspective |
Ab Global and New Perspective Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Global and New Perspective
The main advantage of trading using opposite Ab Global and New Perspective positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Global 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.| Ab Global vs. Commonwealth Real Estate | Ab Global vs. Gamco Global Opportunity | Ab Global vs. HUMANA INC | Ab Global vs. Aquagold International |
| New Perspective vs. American Funds New | New Perspective vs. New Perspective Fund | New Perspective vs. New Perspective Fund | New Perspective vs. New Perspective Fund |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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