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 Moderate, 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
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Regional and Multimanager is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Regional Bank Fund and Multimanager Lifestyle Moderat 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 generate 4.65 times more return on investment than Multimanager Lifestyle. However, Regional Bank is 4.65 times more volatile than Multimanager Lifestyle Moderate. It trades about 0.11 of its potential returns per unit of risk. Multimanager Lifestyle Moderate is currently generating about 0.14 per unit of risk. If you would invest 2,160 in Regional Bank Fund on August 25, 2024 and sell it today you would earn a total of 1,227 from holding Regional Bank Fund or generate 56.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regional Bank Fund vs. Multimanager Lifestyle Moderat
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. Regional Bank Fund | Regional Bank vs. Regional Bank Fund | Regional Bank vs. Multimanager Lifestyle Moderate | Regional Bank 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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