Correlation Between Multimanager Lifestyle and Multi Index

Can any of the company-specific risk be diversified away by investing in both Multimanager Lifestyle and Multi Index 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 Multimanager Lifestyle and Multi Index into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Multimanager Lifestyle Moderate and Multi Index 2030 Lifetime, you can compare the effects of market volatilities on Multimanager Lifestyle and Multi Index 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 Multimanager Lifestyle with a short position of Multi Index. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multimanager Lifestyle and Multi Index.

Diversification Opportunities for Multimanager Lifestyle and Multi Index

0.95

Correlation Coefficient

Multimanager Lifestyle  Multi Index

Almost no diversification

The 3 months correlation between Multimanager and Multi is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Multimanager Lifestyle Moderat and Multi Index 2030 Lifetime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Index 2030 and Multimanager Lifestyle 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 Multimanager Lifestyle Moderate are associated (or correlated) with Multi Index. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Index 2030 has no effect on the direction of Multimanager Lifestyle i.e., Multimanager Lifestyle and Multi Index go up and down completely randomly.

Pair Corralation between Multimanager Lifestyle and Multi Index

Assuming the 90 days horizon Multimanager Lifestyle is expected to generate 2.88 times less return on investment than Multi Index. But when comparing it to its historical volatility, Multimanager Lifestyle Moderate is 1.32 times less risky than Multi Index. It trades about 0.02 of its potential returns per unit of risk. Multi Index 2030 Lifetime is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,258  in Multi Index 2030 Lifetime on September 14, 2024 and sell it today you would earn a total of  15.00  from holding Multi Index 2030 Lifetime or generate 1.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Multimanager Lifestyle Moderat  vs.  Multi Index 2030 Lifetime

Multimanager Lifestyle

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Multimanager Lifestyle Moderate are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong primary indicators, Multimanager Lifestyle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Multi Index 2030

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Index 2030 Lifetime are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Multi Index is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Multimanager Lifestyle and Multi Index

The main advantage of trading using opposite Multimanager Lifestyle and Multi Index positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multimanager Lifestyle position performs unexpectedly, Multi Index 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 Index will offset losses from the drop in Multi Index's long position.

The idea behind Multimanager Lifestyle Moderate and Multi Index 2030 Lifetime 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.