Correlation Between New Economy and Environment

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

By analyzing existing cross correlation between New Economy Fund and Environment And Alternative, you can compare the effects of market volatilities on New Economy and Environment 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 Economy with a short position of Environment. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Economy and Environment.

Diversification Opportunities for New Economy and Environment

0.78

Correlation Coefficient

New Economy  Environment

Poor diversification

The 3 months correlation between New and Environment is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding New Economy Fund and Environment And Alternative in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Environment And Alte and New Economy 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 Economy Fund are associated (or correlated) with Environment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Environment And Alte has no effect on the direction of New Economy i.e., New Economy and Environment go up and down completely randomly.

Pair Corralation between New Economy and Environment

Assuming the 90 days horizon New Economy is expected to generate 1.02 times less return on investment than Environment. But when comparing it to its historical volatility, New Economy Fund is 1.12 times less risky than Environment. It trades about 0.15 of its potential returns per unit of risk. Environment And Alternative is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3,852  in Environment And Alternative on September 15, 2024 and sell it today you would earn a total of  310.00  from holding Environment And Alternative or generate 8.05% return on investment over 90 days.

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

New Economy Fund  vs.  Environment And Alternative

New Economy Fund

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Economy Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, New Economy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Environment And Alte

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Environment And Alternative are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Environment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with New Economy and Environment

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

The idea behind New Economy Fund and Environment And Alternative 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.

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.