Correlation Between Blue Chip and Multimanager Lifestyle
Can any of the company-specific risk be diversified away by investing in both Blue Chip 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 Blue Chip and Multimanager Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Chip Growth and Multimanager Lifestyle Balanced, you can compare the effects of market volatilities on Blue Chip 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 Blue Chip with a short position of Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Chip and Multimanager Lifestyle.
Diversification Opportunities for Blue Chip and Multimanager Lifestyle
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Blue and Multimanager is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Blue Chip Growth and Multimanager Lifestyle Balance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle and Blue Chip 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 Blue Chip 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 Blue Chip i.e., Blue Chip and Multimanager Lifestyle go up and down completely randomly.
Pair Corralation between Blue Chip and Multimanager Lifestyle
Assuming the 90 days horizon Blue Chip Growth is expected to under-perform the Multimanager Lifestyle. In addition to that, Blue Chip is 3.32 times more volatile than Multimanager Lifestyle Balanced. It trades about -0.09 of its total potential returns per unit of risk. Multimanager Lifestyle Balanced is currently generating about -0.2 per unit of volatility. If you would invest 1,387 in Multimanager Lifestyle Balanced on September 25, 2024 and sell it today you would lose (29.00) from holding Multimanager Lifestyle Balanced or give up 2.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Chip Growth vs. Multimanager Lifestyle Balance
Performance |
| Timeline |
| Blue Chip Growth |
| Multimanager Lifestyle |
Blue Chip and Multimanager Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Chip and Multimanager Lifestyle
The main advantage of trading using opposite Blue Chip and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Chip 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.| Blue Chip vs. Regional Bank Fund | Blue Chip vs. Regional Bank Fund | Blue Chip vs. Multimanager Lifestyle Moderate | Blue Chip vs. Multimanager Lifestyle Balanced |
| Multimanager Lifestyle vs. John Hancock Bond | Multimanager Lifestyle vs. John Hancock Disciplined | Multimanager Lifestyle vs. Blue Chip Growth | Multimanager Lifestyle vs. John Hancock Income |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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