Correlation Between Multifactor and Select Us
Can any of the company-specific risk be diversified away by investing in both Multifactor and Select Us 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 Select Us 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 Select Equity Fund, you can compare the effects of market volatilities on Multifactor and Select Us 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 Select Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multifactor and Select Us.
Diversification Opportunities for Multifactor and Select Us
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Multifactor and Select is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Multifactor Equity Fund and Select Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Equity 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 Select Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Equity has no effect on the direction of Multifactor i.e., Multifactor and Select Us go up and down completely randomly.
Pair Corralation between Multifactor and Select Us
Assuming the 90 days horizon Multifactor Equity Fund is expected to generate 1.0 times more return on investment than Select Us. However, Multifactor is 1.0 times more volatile than Select Equity Fund. It trades about 0.24 of its potential returns per unit of risk. Select Equity Fund is currently generating about 0.22 per unit of risk. If you would invest 1,962 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 4.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multifactor Equity Fund vs. Select Equity Fund
Performance |
| Timeline |
| Multifactor Equity |
| Select Equity |
Multifactor and Select Us Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multifactor and Select Us
The main advantage of trading using opposite Multifactor and Select Us positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multifactor position performs unexpectedly, Select Us 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 Select Us will offset losses from the drop in Select Us' long position.| Multifactor vs. International Developed Markets | Multifactor vs. Global Real Estate | Multifactor vs. Global Real Estate | Multifactor vs. Global Real Estate |
| Select Us vs. International Developed Markets | Select Us vs. Global Real Estate | Select Us vs. Global Real Estate | Select Us 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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