Correlation Between Select International and Multifactor
Can any of the company-specific risk be diversified away by investing in both Select International 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 Select International and Multifactor into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Select International Equity and Multifactor Equity Fund, you can compare the effects of market volatilities on Select International 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 Select International with a short position of Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select International and Multifactor.
Diversification Opportunities for Select International and Multifactor
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Select and Multifactor is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Select International Equity and Multifactor Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multifactor Equity and Select International 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 Select International Equity 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 Select International i.e., Select International and Multifactor go up and down completely randomly.
Pair Corralation between Select International and Multifactor
Assuming the 90 days horizon Select International Equity is expected to under-perform the Multifactor. But the mutual fund apears to be less risky and, when comparing its historical volatility, Select International Equity is 1.2 times less risky than Multifactor. The mutual fund trades about -0.15 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 |
Select International Equity vs. Multifactor Equity Fund
Performance |
| Timeline |
| Select International |
| Multifactor Equity |
Select International and Multifactor Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select International and Multifactor
The main advantage of trading using opposite Select International and Multifactor positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select International 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.| Select International vs. International Developed Markets | Select International vs. Global Real Estate | Select International vs. Global Real Estate | Select International vs. Global Real Estate |
| 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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