Correlation Between American Funds and Multimanager Lifestyle
Can any of the company-specific risk be diversified away by investing in both American Funds and Multimanager Lifestyle 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 American Funds and Multimanager Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Funds Growth and Multimanager Lifestyle Aggressive, you can compare the effects of market volatilities on American Funds and Multimanager Lifestyle 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 American Funds with a short position of Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Funds and Multimanager Lifestyle.
Diversification Opportunities for American Funds and Multimanager Lifestyle
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between American and Multimanager is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding American Funds Growth and Multimanager Lifestyle Aggress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle and American Funds 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 American Funds Growth are associated (or correlated) with Multimanager Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimanager Lifestyle has no effect on the direction of American Funds i.e., American Funds and Multimanager Lifestyle go up and down completely randomly.
Pair Corralation between American Funds and Multimanager Lifestyle
Assuming the 90 days horizon American Funds Growth is expected to under-perform the Multimanager Lifestyle. In addition to that, American Funds is 1.28 times more volatile than Multimanager Lifestyle Aggressive. It trades about -0.3 of its total potential returns per unit of risk. Multimanager Lifestyle Aggressive is currently generating about -0.21 per unit of volatility. If you would invest 1,509 in Multimanager Lifestyle Aggressive on December 8, 2024 and sell it today you would lose (55.00) from holding Multimanager Lifestyle Aggressive or give up 3.64% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Funds Growth vs. Multimanager Lifestyle Aggress
Performance |
| Timeline |
| American Funds Growth |
| Multimanager Lifestyle |
American Funds and Multimanager Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Funds and Multimanager Lifestyle
The main advantage of trading using opposite American Funds and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Funds position performs unexpectedly, Multimanager Lifestyle 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 Multimanager Lifestyle will offset losses from the drop in Multimanager Lifestyle's long position.| American Funds vs. Neuberger Berman Income | ||
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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