Correlation Between Multimanager Lifestyle and Small Cap
Can any of the company-specific risk be diversified away by investing in both Multimanager Lifestyle and Small Cap 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 Small Cap 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 Small Cap Value, you can compare the effects of market volatilities on Multimanager Lifestyle and Small Cap 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 Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multimanager Lifestyle and Small Cap.
Diversification Opportunities for Multimanager Lifestyle and Small Cap
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Multimanager and SMALL is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Multimanager Lifestyle Aggress and Small Cap Value in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Value 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 Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Value has no effect on the direction of Multimanager Lifestyle i.e., Multimanager Lifestyle and Small Cap go up and down completely randomly.
Pair Corralation between Multimanager Lifestyle and Small Cap
Assuming the 90 days horizon Multimanager Lifestyle is expected to generate 3.23 times less return on investment than Small Cap. But when comparing it to its historical volatility, Multimanager Lifestyle Aggressive is 2.54 times less risky than Small Cap. It trades about 0.12 of its potential returns per unit of risk. Small Cap Value is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,847 in Small Cap Value on August 29, 2024 and sell it today you would earn a total of 111.00 from holding Small Cap Value or generate 6.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multimanager Lifestyle Aggress vs. Small Cap Value
Performance |
| Timeline |
| Multimanager Lifestyle |
| Small Cap Value |
Multimanager Lifestyle and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multimanager Lifestyle and Small Cap
The main advantage of trading using opposite Multimanager Lifestyle and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multimanager Lifestyle position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.The idea behind Multimanager Lifestyle Aggressive and Small Cap Value pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| Small Cap vs. Regional Bank Fund | Small Cap vs. Regional Bank Fund | Small Cap vs. Multimanager Lifestyle Moderate | Small Cap 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
Other Complementary Tools
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Global Correlations Find global opportunities by holding instruments from different markets |