Correlation Between Multimanager Lifestyle and Ultraemerging Markets

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

By analyzing existing cross correlation between Multimanager Lifestyle Aggressive and Ultraemerging Markets Profund, you can compare the effects of market volatilities on Multimanager Lifestyle and Ultraemerging Markets 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 Ultraemerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multimanager Lifestyle and Ultraemerging Markets.

Diversification Opportunities for Multimanager Lifestyle and Ultraemerging Markets

0.39

Correlation Coefficient

Multimanager Lifestyle  Ultraemerging Markets

Weak diversification

The 3 months correlation between MULTIMANAGER and Ultraemerging is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Multimanager Lifestyle Aggress and Ultraemerging Markets Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultraemerging Markets 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 Aggressive are associated (or correlated) with Ultraemerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultraemerging Markets has no effect on the direction of Multimanager Lifestyle i.e., Multimanager Lifestyle and Ultraemerging Markets go up and down completely randomly.

Pair Corralation between Multimanager Lifestyle and Ultraemerging Markets

Assuming the 90 days horizon Multimanager Lifestyle is expected to generate 1.58 times less return on investment than Ultraemerging Markets. But when comparing it to its historical volatility, Multimanager Lifestyle Aggressive is 4.3 times less risky than Ultraemerging Markets. It trades about 0.17 of its potential returns per unit of risk. Ultraemerging Markets Profund is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,653  in Ultraemerging Markets Profund on September 5, 2024 and sell it today you would earn a total of  415.00  from holding Ultraemerging Markets Profund or generate 8.92% return on investment over 90 days.

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

Multimanager Lifestyle Aggress  vs.  Ultraemerging Markets Profund

Multimanager Lifestyle

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multimanager Lifestyle Aggressive are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Multimanager Lifestyle may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Ultraemerging Markets

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ultraemerging Markets Profund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Ultraemerging Markets may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Multimanager Lifestyle and Ultraemerging Markets

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

The idea behind Multimanager Lifestyle Aggressive and Ultraemerging Markets Profund 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.