Correlation Between Regional Bank and Multi Index
Can any of the company-specific risk be diversified away by investing in both Regional Bank and Multi Index 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 Multi Index 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 Multi Index 2040 Lifetime, you can compare the effects of market volatilities on Regional Bank and Multi Index 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 Multi Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Bank and Multi Index.
Diversification Opportunities for Regional Bank and Multi Index
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Regional and Multi is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Regional Bank Fund and Multi Index 2040 Lifetime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Index 2040 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 Multi Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Index 2040 has no effect on the direction of Regional Bank i.e., Regional Bank and Multi Index go up and down completely randomly.
Pair Corralation between Regional Bank and Multi Index
Assuming the 90 days horizon Regional Bank Fund is expected to generate 2.64 times more return on investment than Multi Index. However, Regional Bank is 2.64 times more volatile than Multi Index 2040 Lifetime. It trades about 0.07 of its potential returns per unit of risk. Multi Index 2040 Lifetime is currently generating about 0.1 per unit of risk. If you would invest 2,401 in Regional Bank Fund on September 14, 2024 and sell it today you would earn a total of 725.00 from holding Regional Bank Fund or generate 30.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Regional Bank Fund vs. Multi Index 2040 Lifetime
Performance |
| Timeline |
| Regional Bank |
| Multi Index 2040 |
Regional Bank and Multi Index Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regional Bank and Multi Index
The main advantage of trading using opposite Regional Bank and Multi Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Bank position performs unexpectedly, Multi Index 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 Index will offset losses from the drop in Multi Index's long position.| Regional Bank vs. Regional Bank Fund | Regional Bank vs. Multimanager Lifestyle Moderate | Regional Bank vs. Multimanager Lifestyle Balanced | Regional Bank vs. Multimanager Lifestyle Aggressive |
| Multi Index vs. Regional Bank Fund | Multi Index vs. Regional Bank Fund | Multi Index vs. Multimanager Lifestyle Moderate | Multi Index vs. Multimanager Lifestyle Balanced |
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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