Correlation Between Multifactor Equity and Us Defensive

Can any of the company-specific risk be diversified away by investing in both Multifactor Equity and Us Defensive 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 Multifactor Equity and Us Defensive into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Multifactor Equity Fund and Us Defensive Equity, you can compare the effects of market volatilities on Multifactor Equity and Us Defensive 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 Multifactor Equity with a short position of Us Defensive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multifactor Equity and Us Defensive.

Diversification Opportunities for Multifactor Equity and Us Defensive

0.98

Correlation Coefficient

Multifactor Equity  Us Defensive

Almost no diversification

The 3 months correlation between Multifactor and REUYX is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Multifactor Equity Fund and Us Defensive Equity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Us Defensive Equity and Multifactor Equity 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 Multifactor Equity Fund are associated (or correlated) with Us Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Us Defensive Equity has no effect on the direction of Multifactor Equity i.e., Multifactor Equity and Us Defensive go up and down completely randomly.

Pair Corralation between Multifactor Equity and Us Defensive

Assuming the 90 days horizon Multifactor Equity Fund is expected to under-perform the Us Defensive. In addition to that, Multifactor Equity is 5.42 times more volatile than Us Defensive Equity. It trades about -0.09 of its total potential returns per unit of risk. Us Defensive Equity is currently generating about 0.09 per unit of volatility. If you would invest  4,988  in Us Defensive Equity on September 20, 2024 and sell it today you would earn a total of  171.00  from holding Us Defensive Equity or generate 3.43% return on investment over 90 days.

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

Multifactor Equity Fund  vs.  Us Defensive Equity

Multifactor Equity

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Multifactor Equity Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Us Defensive Equity

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Us Defensive Equity are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Us Defensive is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Multifactor Equity and Us Defensive

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

The idea behind Multifactor Equity Fund and Us Defensive Equity 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.