Correlation Between Multifactor and Global Real
Can any of the company-specific risk be diversified away by investing in both Multifactor and Global Real 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 Global Real 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 Global Real Estate, you can compare the effects of market volatilities on Multifactor and Global Real 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 Global Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multifactor and Global Real.
Diversification Opportunities for Multifactor and Global Real
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Multifactor and Global is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Multifactor Equity Fund and Global Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Real Estate 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 Global Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Real Estate has no effect on the direction of Multifactor i.e., Multifactor and Global Real go up and down completely randomly.
Pair Corralation between Multifactor and Global Real
Assuming the 90 days horizon Multifactor Equity Fund is expected to generate 0.82 times more return on investment than Global Real. However, Multifactor Equity Fund is 1.22 times less risky than Global Real. It trades about 0.18 of its potential returns per unit of risk. Global Real Estate is currently generating about 0.1 per unit of risk. If you would invest 1,518 in Multifactor Equity Fund on November 1, 2024 and sell it today you would earn a total of 46.00 from holding Multifactor Equity Fund or generate 3.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multifactor Equity Fund vs. Global Real Estate
Performance |
| Timeline |
| Multifactor Equity |
| Global Real Estate |
Multifactor and Global Real Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multifactor and Global Real
The main advantage of trading using opposite Multifactor and Global Real positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multifactor position performs unexpectedly, Global Real 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 Real will offset losses from the drop in Global Real's long position.| Multifactor vs. International Developed Markets | Multifactor vs. Global Real Estate | Multifactor vs. Global Real Estate | Multifactor vs. Global Real Estate |
| Global Real vs. Columbia Global Technology | Global Real vs. Blackrock Science Technology | Global Real vs. Red Oak Technology | Global Real vs. Columbia Global Technology |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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