Correlation Between Multi-asset Growth and Global Infrastructure
Can any of the company-specific risk be diversified away by investing in both Multi-asset Growth and Global Infrastructure 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-asset Growth and Global Infrastructure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multi Asset Growth Strategy and Global Infrastructure Fund, you can compare the effects of market volatilities on Multi-asset Growth and Global Infrastructure 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-asset Growth with a short position of Global Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi-asset Growth and Global Infrastructure.
Diversification Opportunities for Multi-asset Growth and Global Infrastructure
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Multi-asset and Global is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Multi Asset Growth Strategy and Global Infrastructure Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Infrastructure and Multi-asset Growth 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 Asset Growth Strategy are associated (or correlated) with Global Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Infrastructure has no effect on the direction of Multi-asset Growth i.e., Multi-asset Growth and Global Infrastructure go up and down completely randomly.
Pair Corralation between Multi-asset Growth and Global Infrastructure
Assuming the 90 days horizon Multi-asset Growth is expected to generate 1.81 times less return on investment than Global Infrastructure. But when comparing it to its historical volatility, Multi Asset Growth Strategy is 1.37 times less risky than Global Infrastructure. It trades about 0.11 of its potential returns per unit of risk. Global Infrastructure Fund is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 890.00 in Global Infrastructure Fund on September 1, 2024 and sell it today you would earn a total of 102.00 from holding Global Infrastructure Fund or generate 11.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multi Asset Growth Strategy vs. Global Infrastructure Fund
Performance |
| Timeline |
| Multi Asset Growth |
| Global Infrastructure |
Multi-asset Growth and Global Infrastructure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multi-asset Growth and Global Infrastructure
The main advantage of trading using opposite Multi-asset Growth and Global Infrastructure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multi-asset Growth position performs unexpectedly, Global Infrastructure 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 Infrastructure will offset losses from the drop in Global Infrastructure's long position.| Multi-asset Growth vs. International Developed Markets | Multi-asset Growth vs. Global Real Estate | Multi-asset Growth vs. Global Real Estate | Multi-asset Growth vs. Global Real Estate |
| Global Infrastructure vs. International Developed Markets | Global Infrastructure vs. Global Real Estate | Global Infrastructure vs. Global Real Estate | Global Infrastructure vs. Global Real Estate |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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