Correlation Between Multi Manager and First American
Can any of the company-specific risk be diversified away by investing in both Multi Manager and First American 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 Multi Manager and First American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multi Manager High Yield and First American Funds, you can compare the effects of market volatilities on Multi Manager and First American 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 Multi Manager with a short position of First American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi Manager and First American.
Diversification Opportunities for Multi Manager and First American
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Multi and First is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Multi Manager High Yield and First American Funds in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First American Funds and Multi Manager 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 Multi Manager High Yield are associated (or correlated) with First American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First American Funds has no effect on the direction of Multi Manager i.e., Multi Manager and First American go up and down completely randomly.
Pair Corralation between Multi Manager and First American
Assuming the 90 days horizon Multi Manager High Yield is expected to generate 0.39 times more return on investment than First American. However, Multi Manager High Yield is 2.53 times less risky than First American. It trades about 0.14 of its potential returns per unit of risk. First American Funds is currently generating about 0.03 per unit of risk. If you would invest 719.00 in Multi Manager High Yield on September 3, 2024 and sell it today you would earn a total of 131.00 from holding Multi Manager High Yield or generate 18.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Multi Manager High Yield vs. First American Funds
Performance |
| Timeline |
| Multi Manager High |
| First American Funds |
Multi Manager and First American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multi Manager and First American
The main advantage of trading using opposite Multi Manager and First American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi Manager position performs unexpectedly, First American 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 First American will offset losses from the drop in First American's long position.| Multi Manager vs. Intermediate Term Tax Free Bond | Multi Manager vs. Federated Pennsylvania Municipal | Multi Manager vs. Ishares Municipal Bond | Multi Manager vs. Morningstar Municipal Bond |
| First American vs. Vanguard Total Stock | First American vs. Vanguard 500 Index | First American vs. Vanguard Total Stock | First American vs. Vanguard Total Stock |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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