Correlation Between Regional Bank and Multimanager Lifestyle
Can any of the company-specific risk be diversified away by investing in both Regional Bank 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 Regional Bank and Multimanager Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regional Bank Fund and Multimanager Lifestyle Growth, you can compare the effects of market volatilities on Regional Bank 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 Regional Bank with a short position of Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Bank and Multimanager Lifestyle.
Diversification Opportunities for Regional Bank and Multimanager Lifestyle
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Regional and Multimanager is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Regional Bank Fund and Multimanager Lifestyle Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle and Regional Bank 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 Regional Bank Fund 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 Regional Bank i.e., Regional Bank and Multimanager Lifestyle go up and down completely randomly.
Pair Corralation between Regional Bank and Multimanager Lifestyle
Assuming the 90 days horizon Regional Bank Fund is expected to under-perform the Multimanager Lifestyle. In addition to that, Regional Bank is 1.91 times more volatile than Multimanager Lifestyle Growth. It trades about -0.08 of its total potential returns per unit of risk. Multimanager Lifestyle Growth is currently generating about 0.07 per unit of volatility. If you would invest 1,487 in Multimanager Lifestyle Growth on September 12, 2024 and sell it today you would earn a total of 9.00 from holding Multimanager Lifestyle Growth or generate 0.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Regional Bank Fund vs. Multimanager Lifestyle Growth
Performance |
| Timeline |
| Regional Bank |
| Multimanager Lifestyle |
Regional Bank and Multimanager Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regional Bank and Multimanager Lifestyle
The main advantage of trading using opposite Regional Bank and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Bank 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.| Regional Bank vs. Blackrock Inflation Protected | Regional Bank vs. Aqr Managed Futures | Regional Bank vs. Short Duration Inflation | Regional Bank vs. Ab Bond Inflation |
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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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