Correlation Between Multi-manager High and Global Core
Can any of the company-specific risk be diversified away by investing in both Multi-manager High and Global Core 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 High and Global Core 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 Global E Portfolio, you can compare the effects of market volatilities on Multi-manager High and Global Core 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 High with a short position of Global Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi-manager High and Global Core.
Diversification Opportunities for Multi-manager High and Global Core
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Multi-manager and Global is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Multi Manager High Yield and Global E Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global E Portfolio and Multi-manager High 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 Global Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global E Portfolio has no effect on the direction of Multi-manager High i.e., Multi-manager High and Global Core go up and down completely randomly.
Pair Corralation between Multi-manager High and Global Core
Assuming the 90 days horizon Multi-manager High is expected to generate 2.9 times less return on investment than Global Core. But when comparing it to its historical volatility, Multi Manager High Yield is 4.75 times less risky than Global Core. It trades about 0.23 of its potential returns per unit of risk. Global E Portfolio is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,613 in Global E Portfolio on August 31, 2024 and sell it today you would earn a total of 527.00 from holding Global E Portfolio or generate 32.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multi Manager High Yield vs. Global E Portfolio
Performance |
| Timeline |
| Multi Manager High |
| Global E Portfolio |
Multi-manager High and Global Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multi-manager High and Global Core
The main advantage of trading using opposite Multi-manager High and Global Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi-manager High position performs unexpectedly, Global Core 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 Global Core will offset losses from the drop in Global Core's long position.| Multi-manager High vs. T Rowe Price | Multi-manager High vs. Strategic Allocation Aggressive | Multi-manager High vs. Metropolitan West High | Multi-manager High vs. Morningstar Aggressive Growth |
| Global Core vs. Legg Mason Partners | Global Core vs. Alpine High Yield | Global Core vs. Fidelity Capital Income | Global Core vs. Multi Manager High Yield |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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