Correlation Between Multi-manager Directional and Multi Manager

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

By analyzing existing cross correlation between Multi Manager Directional Alternative and Multi Manager Growth Strategies, you can compare the effects of market volatilities on Multi-manager Directional and Multi Manager 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 Multi-manager Directional with a short position of Multi Manager. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi-manager Directional and Multi Manager.

Diversification Opportunities for Multi-manager Directional and Multi Manager

0.82

Correlation Coefficient

Multi-manager Directional  Multi Manager

Very poor diversification

The 3 months correlation between Multi-manager and Multi is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Multi Manager Directional Alte and Multi Manager Growth Strategie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager Growth and Multi-manager Directional 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 Multi Manager Directional Alternative are associated (or correlated) with Multi Manager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager Growth has no effect on the direction of Multi-manager Directional i.e., Multi-manager Directional and Multi Manager go up and down completely randomly.

Pair Corralation between Multi-manager Directional and Multi Manager

Assuming the 90 days horizon Multi-manager Directional is expected to generate 2.44 times less return on investment than Multi Manager. But when comparing it to its historical volatility, Multi Manager Directional Alternative is 2.02 times less risky than Multi Manager. It trades about 0.07 of its potential returns per unit of risk. Multi Manager Growth Strategies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,359  in Multi Manager Growth Strategies on October 12, 2024 and sell it today you would earn a total of  715.00  from holding Multi Manager Growth Strategies or generate 52.61% return on investment over 90 days.

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

Multi Manager Directional Alte  vs.  Multi Manager Growth Strategie

Multi-manager Directional

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Multi Manager Directional Alternative has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Multi-manager Directional is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Multi Manager Growth

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Multi-manager Directional and Multi Manager

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

The idea behind Multi Manager Directional Alternative and Multi Manager Growth Strategies 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.