Correlation Between Absolute Convertible and Multimanager Lifestyle

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Can any of the company-specific risk be diversified away by investing in both Absolute Convertible and Multimanager 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 Absolute Convertible and Multimanager Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Absolute Convertible Arbitrage and Multimanager Lifestyle Growth, you can compare the effects of market volatilities on Absolute Convertible and Multimanager 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 Absolute Convertible with a short position of Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Absolute Convertible and Multimanager Lifestyle.

Diversification Opportunities for Absolute Convertible and Multimanager Lifestyle

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Absolute and Multimanager is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Absolute Convertible Arbitrage and Multimanager Lifestyle Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle and Absolute Convertible 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 Absolute Convertible Arbitrage are associated (or correlated) with Multimanager Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimanager Lifestyle has no effect on the direction of Absolute Convertible i.e., Absolute Convertible and Multimanager Lifestyle go up and down completely randomly.

Pair Corralation between Absolute Convertible and Multimanager Lifestyle

Assuming the 90 days horizon Absolute Convertible Arbitrage is expected to under-perform the Multimanager Lifestyle. But the mutual fund apears to be less risky and, when comparing its historical volatility, Absolute Convertible Arbitrage is 3.67 times less risky than Multimanager Lifestyle. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Multimanager Lifestyle Growth is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,413  in Multimanager Lifestyle Growth on October 23, 2024 and sell it today you would earn a total of  5.00  from holding Multimanager Lifestyle Growth or generate 0.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Absolute Convertible Arbitrage  vs.  Multimanager Lifestyle Growth

 Performance 
       Timeline  
Absolute Convertible 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Absolute Convertible Arbitrage has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Absolute Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Multimanager Lifestyle 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Multimanager Lifestyle Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Multimanager Lifestyle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Absolute Convertible and Multimanager Lifestyle Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Absolute Convertible and Multimanager Lifestyle

The main advantage of trading using opposite Absolute Convertible and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Absolute Convertible position performs unexpectedly, Multimanager 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 Multimanager Lifestyle will offset losses from the drop in Multimanager Lifestyle's long position.
The idea behind Absolute Convertible Arbitrage and Multimanager Lifestyle Growth 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.

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