Correlation Between Vela Large and Multi Manager
Can any of the company-specific risk be diversified away by investing in both Vela Large 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 Vela Large and Multi Manager into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vela Large Cap and Multi Manager High Yield, you can compare the effects of market volatilities on Vela Large 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 Vela Large with a short position of Multi Manager. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vela Large and Multi Manager.
Diversification Opportunities for Vela Large and Multi Manager
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between VELA and Multi is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Vela Large Cap 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 Vela Large 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 Vela Large Cap 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 Vela Large i.e., Vela Large and Multi Manager go up and down completely randomly.
Pair Corralation between Vela Large and Multi Manager
Assuming the 90 days horizon Vela Large Cap is expected to generate 4.1 times more return on investment than Multi Manager. However, Vela Large is 4.1 times more volatile than Multi Manager High Yield. It trades about 0.32 of its potential returns per unit of risk. Multi Manager High Yield is currently generating about 0.16 per unit of risk. If you would invest 1,756 in Vela Large Cap on September 4, 2024 and sell it today you would earn a total of 63.00 from holding Vela Large Cap or generate 3.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Vela Large Cap vs. Multi Manager High Yield
Performance |
| Timeline |
| Vela Large Cap |
| Multi Manager High |
Vela Large and Multi Manager Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vela Large and Multi Manager
The main advantage of trading using opposite Vela Large and Multi Manager positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vela Large 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.| Vela Large vs. Vanguard Equity Income | Vela Large vs. Franklin Pennsylvania Tax Free | Vela Large vs. Invesco High Yield | Vela Large vs. Small Cap Equity |
| Multi Manager vs. Touchstone Large Cap | Multi Manager vs. Transamerica Large Cap | Multi Manager vs. Vela Large Cap | Multi Manager vs. Siit Large Cap |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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