Correlation Between Wealthbuilder Moderate and Lifestyle
Can any of the company-specific risk be diversified away by investing in both Wealthbuilder Moderate and Lifestyle 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 Wealthbuilder Moderate and Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wealthbuilder Moderate Balanced and Lifestyle Ii Moderate, you can compare the effects of market volatilities on Wealthbuilder Moderate and Lifestyle 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 Wealthbuilder Moderate with a short position of Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wealthbuilder Moderate and Lifestyle.
Diversification Opportunities for Wealthbuilder Moderate and Lifestyle
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wealthbuilder and Lifestyle is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Wealthbuilder Moderate Balance and Lifestyle Ii Moderate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifestyle Ii Moderate and Wealthbuilder Moderate 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 Wealthbuilder Moderate Balanced are associated (or correlated) with Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifestyle Ii Moderate has no effect on the direction of Wealthbuilder Moderate i.e., Wealthbuilder Moderate and Lifestyle go up and down completely randomly.
Pair Corralation between Wealthbuilder Moderate and Lifestyle
Assuming the 90 days horizon Wealthbuilder Moderate is expected to generate 1.88 times less return on investment than Lifestyle. In addition to that, Wealthbuilder Moderate is 1.17 times more volatile than Lifestyle Ii Moderate. It trades about 0.12 of its total potential returns per unit of risk. Lifestyle Ii Moderate is currently generating about 0.27 per unit of volatility. If you would invest 1,080 in Lifestyle Ii Moderate on November 3, 2024 and sell it today you would earn a total of 23.00 from holding Lifestyle Ii Moderate or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wealthbuilder Moderate Balance vs. Lifestyle Ii Moderate
Performance |
| Timeline |
| Wealthbuilder Moderate |
| Lifestyle Ii Moderate |
Wealthbuilder Moderate and Lifestyle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wealthbuilder Moderate and Lifestyle
The main advantage of trading using opposite Wealthbuilder Moderate and Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wealthbuilder Moderate position performs unexpectedly, Lifestyle 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 Lifestyle will offset losses from the drop in Lifestyle's long position.The idea behind Wealthbuilder Moderate Balanced and Lifestyle Ii Moderate pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Lifestyle vs. Federated Emerging Market | Lifestyle vs. Barings Active Short | Lifestyle vs. Franklin Emerging Market | Lifestyle vs. Ashmore Emerging Markets |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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