Correlation Between Growth Fund and Multi Asset
Can any of the company-specific risk be diversified away by investing in both Growth Fund and Multi Asset 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 Growth Fund and Multi Asset into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Growth Fund C and Multi Asset Real Return, you can compare the effects of market volatilities on Growth Fund and Multi Asset 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 Growth Fund with a short position of Multi Asset. Check out your portfolio center. Please also check ongoing floating volatility patterns of Growth Fund and Multi Asset.
Diversification Opportunities for Growth Fund and Multi Asset
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Growth and Multi is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Growth Fund C and Multi Asset Real Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Asset Real and Growth Fund 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 Growth Fund C are associated (or correlated) with Multi Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Asset Real has no effect on the direction of Growth Fund i.e., Growth Fund and Multi Asset go up and down completely randomly.
Pair Corralation between Growth Fund and Multi Asset
Assuming the 90 days horizon Growth Fund C is expected to under-perform the Multi Asset. In addition to that, Growth Fund is 1.29 times more volatile than Multi Asset Real Return. It trades about -0.08 of its total potential returns per unit of risk. Multi Asset Real Return is currently generating about -0.07 per unit of volatility. If you would invest 2,359 in Multi Asset Real Return on September 22, 2024 and sell it today you would lose (51.00) from holding Multi Asset Real Return or give up 2.16% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Growth Fund C vs. Multi Asset Real Return
Performance |
| Timeline |
| Growth Fund C |
| Multi Asset Real |
Growth Fund and Multi Asset Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Growth Fund and Multi Asset
The main advantage of trading using opposite Growth Fund and Multi Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Growth Fund position performs unexpectedly, Multi Asset 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 Multi Asset will offset losses from the drop in Multi Asset's long position.| Growth Fund vs. Growth Portfolio Class | Growth Fund vs. Small Cap Growth | Growth Fund vs. Brown Advisory Sustainable | Growth Fund vs. Morgan Stanley Multi |
| Multi Asset vs. Mid Cap Value | Multi Asset vs. Equity Growth Fund | Multi Asset vs. Income Growth Fund | Multi Asset vs. Diversified Bond Fund |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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