Correlation Between Applied Finance and Multi-manager High
Can any of the company-specific risk be diversified away by investing in both Applied Finance and Multi-manager High 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 Applied Finance and Multi-manager High into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Finance Explorer and Multi Manager High Yield, you can compare the effects of market volatilities on Applied Finance and Multi-manager High 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 Applied Finance with a short position of Multi-manager High. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Finance and Multi-manager High.
Diversification Opportunities for Applied Finance and Multi-manager High
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Applied and Multi-manager is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Applied Finance Explorer and Multi Manager High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager High and Applied Finance 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 Applied Finance Explorer are associated (or correlated) with Multi-manager High. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager High has no effect on the direction of Applied Finance i.e., Applied Finance and Multi-manager High go up and down completely randomly.
Pair Corralation between Applied Finance and Multi-manager High
Assuming the 90 days horizon Applied Finance Explorer is expected to generate 5.91 times more return on investment than Multi-manager High. However, Applied Finance is 5.91 times more volatile than Multi Manager High Yield. It trades about 0.22 of its potential returns per unit of risk. Multi Manager High Yield is currently generating about 0.31 per unit of risk. If you would invest 2,190 in Applied Finance Explorer on November 4, 2024 and sell it today you would earn a total of 93.00 from holding Applied Finance Explorer or generate 4.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Applied Finance Explorer vs. Multi Manager High Yield
Performance |
| Timeline |
| Applied Finance Explorer |
| Multi Manager High |
Applied Finance and Multi-manager High Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Finance and Multi-manager High
The main advantage of trading using opposite Applied Finance and Multi-manager High positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Finance position performs unexpectedly, Multi-manager High 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 Multi-manager High will offset losses from the drop in Multi-manager High's long position.| Applied Finance vs. Thrivent Small Cap | Applied Finance vs. Applied Finance Select | Applied Finance vs. Parnassus Endeavor Fund | Applied Finance vs. Queens Road Small |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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