Correlation Between Multimanager Lifestyle and American Funds
Can any of the company-specific risk be diversified away by investing in both Multimanager Lifestyle and American Funds 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 Multimanager Lifestyle and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multimanager Lifestyle Aggressive and American Funds Growth, you can compare the effects of market volatilities on Multimanager Lifestyle and American Funds 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 Multimanager Lifestyle with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multimanager Lifestyle and American Funds.
Diversification Opportunities for Multimanager Lifestyle and American Funds
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Multimanager and American is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Multimanager Lifestyle Aggress and American Funds Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds Growth and Multimanager Lifestyle 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 Multimanager Lifestyle Aggressive are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds Growth has no effect on the direction of Multimanager Lifestyle i.e., Multimanager Lifestyle and American Funds go up and down completely randomly.
Pair Corralation between Multimanager Lifestyle and American Funds
Assuming the 90 days horizon Multimanager Lifestyle is expected to generate 1.61 times less return on investment than American Funds. But when comparing it to its historical volatility, Multimanager Lifestyle Aggressive is 1.16 times less risky than American Funds. It trades about 0.06 of its potential returns per unit of risk. American Funds Growth is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,853 in American Funds Growth on November 27, 2024 and sell it today you would earn a total of 726.00 from holding American Funds Growth or generate 39.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multimanager Lifestyle Aggress vs. American Funds Growth
Performance |
| Timeline |
| Multimanager Lifestyle |
| American Funds Growth |
Multimanager Lifestyle and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multimanager Lifestyle and American Funds
The main advantage of trading using opposite Multimanager Lifestyle and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multimanager Lifestyle position performs unexpectedly, American Funds 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 American Funds will offset losses from the drop in American Funds' long position.| Multimanager Lifestyle vs. Cref Inflation Linked Bond | Multimanager Lifestyle vs. Short Duration Inflation | Multimanager Lifestyle vs. Ab Bond Inflation | Multimanager Lifestyle vs. Lord Abbett Inflation |
| American Funds vs. Embark Commodity Strategy | American Funds vs. Siit Emerging Markets | American Funds vs. Commodities Strategy Fund | American Funds vs. Dodge Cox Emerging |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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