Correlation Between Global Franchise and Multimanager Lifestyle
Can any of the company-specific risk be diversified away by investing in both Global Franchise 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 Global Franchise and Multimanager Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Franchise Portfolio and Multimanager Lifestyle Aggressive, you can compare the effects of market volatilities on Global Franchise 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 Global Franchise with a short position of Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Franchise and Multimanager Lifestyle.
Diversification Opportunities for Global Franchise and Multimanager Lifestyle
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Global and Multimanager is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Global Franchise Portfolio and Multimanager Lifestyle Aggress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle and Global Franchise 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 Global Franchise Portfolio 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 Global Franchise i.e., Global Franchise and Multimanager Lifestyle go up and down completely randomly.
Pair Corralation between Global Franchise and Multimanager Lifestyle
Assuming the 90 days horizon Global Franchise is expected to generate 1.35 times less return on investment than Multimanager Lifestyle. But when comparing it to its historical volatility, Global Franchise Portfolio is 1.14 times less risky than Multimanager Lifestyle. It trades about 0.08 of its potential returns per unit of risk. Multimanager Lifestyle Aggressive is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,115 in Multimanager Lifestyle Aggressive on September 12, 2024 and sell it today you would earn a total of 435.00 from holding Multimanager Lifestyle Aggressive or generate 39.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Global Franchise Portfolio vs. Multimanager Lifestyle Aggress
Performance |
| Timeline |
| Global Franchise Por |
| Multimanager Lifestyle |
Global Franchise and Multimanager Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Franchise and Multimanager Lifestyle
The main advantage of trading using opposite Global Franchise and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Franchise 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.| Global Franchise vs. Rational Strategic Allocation | Global Franchise vs. Morningstar Unconstrained Allocation | Global Franchise vs. Alternative Asset Allocation | Global Franchise vs. Aqr Large Cap |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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