Correlation Between Global Real and Multifactor
Can any of the company-specific risk be diversified away by investing in both Global Real and Multifactor 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 Real and Multifactor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Real Estate and Multifactor Equity Fund, you can compare the effects of market volatilities on Global Real and Multifactor 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 Real with a short position of Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Real and Multifactor.
Diversification Opportunities for Global Real and Multifactor
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Global and Multifactor is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Global Real Estate and Multifactor Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multifactor Equity and Global Real 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 Real Estate are associated (or correlated) with Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multifactor Equity has no effect on the direction of Global Real i.e., Global Real and Multifactor go up and down completely randomly.
Pair Corralation between Global Real and Multifactor
Assuming the 90 days horizon Global Real Estate is expected to under-perform the Multifactor. But the mutual fund apears to be less risky and, when comparing its historical volatility, Global Real Estate is 1.06 times less risky than Multifactor. The mutual fund trades about 0.0 of its potential returns per unit of risk. The Multifactor Equity Fund is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,986 in Multifactor Equity Fund on August 29, 2024 and sell it today you would earn a total of 92.00 from holding Multifactor Equity Fund or generate 4.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Real Estate vs. Multifactor Equity Fund
Performance |
| Timeline |
| Global Real Estate |
| Multifactor Equity |
Global Real and Multifactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Real and Multifactor
The main advantage of trading using opposite Global Real and Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Real position performs unexpectedly, Multifactor 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 Multifactor will offset losses from the drop in Multifactor's long position.| Global Real vs. International Developed Markets | Global Real vs. Growth Strategy Fund | Global Real vs. Growth Strategy Fund | Global Real vs. Growth Strategy Fund |
| Multifactor vs. International Developed Markets | Multifactor vs. Global Real Estate | Multifactor vs. Global Real Estate | Multifactor 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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