Correlation Between Multifactor and Balanced Strategy
Can any of the company-specific risk be diversified away by investing in both Multifactor and Balanced 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 Balanced 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 Balanced Strategy Fund, you can compare the effects of market volatilities on Multifactor and Balanced 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 Balanced Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multifactor and Balanced Strategy.
Diversification Opportunities for Multifactor and Balanced Strategy
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Multifactor and Balanced is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Multifactor Equity Fund and Balanced Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balanced 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 Balanced Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balanced Strategy has no effect on the direction of Multifactor i.e., Multifactor and Balanced Strategy go up and down completely randomly.
Pair Corralation between Multifactor and Balanced Strategy
Assuming the 90 days horizon Multifactor Equity Fund is expected to generate 1.85 times more return on investment than Balanced Strategy. However, Multifactor is 1.85 times more volatile than Balanced Strategy Fund. It trades about 0.23 of its potential returns per unit of risk. Balanced Strategy Fund is currently generating about 0.12 per unit of risk. If you would invest 1,986 in Multifactor Equity Fund on August 28, 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Multifactor Equity Fund vs. Balanced Strategy Fund
Performance |
| Timeline |
| Multifactor Equity |
| Balanced Strategy |
Multifactor and Balanced Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Multifactor and Balanced Strategy
The main advantage of trading using opposite Multifactor and Balanced Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multifactor position performs unexpectedly, Balanced 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 Balanced Strategy will offset losses from the drop in Balanced Strategy's long position.| Multifactor vs. International Developed Markets | Multifactor vs. Global Real Estate | Multifactor vs. Global Real Estate | Multifactor vs. Global Real Estate |
| Balanced Strategy vs. Columbia Real Estate | Balanced Strategy vs. Dunham Real Estate | Balanced Strategy vs. Prudential Real Estate | Balanced Strategy vs. T Rowe Price |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios |