Correlation Between Multifactor and Conservative Strategy
Can any of the company-specific risk be diversified away by investing in both Multifactor and Conservative Strategy 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 Multifactor and Conservative Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Multifactor Equity Fund and Conservative Strategy Fund, you can compare the effects of market volatilities on Multifactor and Conservative Strategy 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 Multifactor with a short position of Conservative Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multifactor and Conservative Strategy.
Diversification Opportunities for Multifactor and Conservative Strategy
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Multifactor and Conservative is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Multifactor Equity Fund and Conservative Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conservative Strategy and Multifactor 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 Multifactor Equity Fund are associated (or correlated) with Conservative Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conservative Strategy has no effect on the direction of Multifactor i.e., Multifactor and Conservative Strategy go up and down completely randomly.
Pair Corralation between Multifactor and Conservative Strategy
Assuming the 90 days horizon Multifactor Equity Fund is expected to under-perform the Conservative Strategy. In addition to that, Multifactor is 2.61 times more volatile than Conservative Strategy Fund. It trades about -0.1 of its total potential returns per unit of risk. Conservative Strategy Fund is currently generating about 0.18 per unit of volatility. If you would invest 850.00 in Conservative Strategy Fund on November 28, 2024 and sell it today you would earn a total of 9.00 from holding Conservative Strategy Fund or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Multifactor Equity Fund vs. Conservative Strategy Fund
Performance |
| Timeline |
| Multifactor Equity |
| Conservative Strategy |
Multifactor and Conservative Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multifactor and Conservative Strategy
The main advantage of trading using opposite Multifactor and Conservative Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multifactor position performs unexpectedly, Conservative Strategy 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 Conservative Strategy will offset losses from the drop in Conservative Strategy's long position.| Multifactor vs. Artisan Select Equity | Multifactor vs. Tax Managed International Equity | Multifactor vs. Federated Government Income | Multifactor vs. Pro Blend Servative Term |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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