Correlation Between Intermediate-term and Multi Manager
Can any of the company-specific risk be diversified away by investing in both Intermediate-term and Multi Manager 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 Intermediate-term and Multi Manager into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intermediate Term Tax Free Bond and Multi Manager High Yield, you can compare the effects of market volatilities on Intermediate-term and Multi Manager 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 Intermediate-term with a short position of Multi Manager. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Multi Manager.
Diversification Opportunities for Intermediate-term and Multi Manager
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Intermediate-term and Multi is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Tax Free Bon and Multi Manager High Yield in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager High and Intermediate-term 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 Intermediate Term Tax Free Bond are associated (or correlated) with Multi Manager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager High has no effect on the direction of Intermediate-term i.e., Intermediate-term and Multi Manager go up and down completely randomly.
Pair Corralation between Intermediate-term and Multi Manager
Assuming the 90 days horizon Intermediate-term is expected to generate 2.45 times less return on investment than Multi Manager. But when comparing it to its historical volatility, Intermediate Term Tax Free Bond is 1.24 times less risky than Multi Manager. It trades about 0.07 of its potential returns per unit of risk. Multi Manager High Yield is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 719.00 in Multi Manager High Yield on September 3, 2024 and sell it today you would earn a total of 131.00 from holding Multi Manager High Yield or generate 18.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intermediate Term Tax Free Bon vs. Multi Manager High Yield
Performance |
| Timeline |
| Intermediate Term Tax |
| Multi Manager High |
Intermediate-term and Multi Manager Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intermediate-term and Multi Manager
The main advantage of trading using opposite Intermediate-term and Multi Manager positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intermediate-term position performs unexpectedly, Multi Manager 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 Manager will offset losses from the drop in Multi Manager's long position.| Intermediate-term vs. Mesirow Financial Small | Intermediate-term vs. Goldman Sachs Financial | Intermediate-term vs. Royce Global Financial | Intermediate-term vs. Davis Financial Fund |
| Multi Manager vs. Intermediate Term Tax Free Bond | Multi Manager vs. Federated Pennsylvania Municipal | Multi Manager vs. Ishares Municipal Bond | Multi Manager vs. Morningstar Municipal Bond |
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.
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