Correlation Between Income Fund and Multimanager Lifestyle

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

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

Diversification Opportunities for Income Fund and Multimanager Lifestyle

0.88

Correlation Coefficient

Income Fund  Multimanager Lifestyle

Very poor diversification

The 3 months correlation between Income and Multimanager is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Income Fund Of and Multimanager Lifestyle Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle and Income Fund 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 Income Fund Of 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 Income Fund i.e., Income Fund and Multimanager Lifestyle go up and down completely randomly.

Pair Corralation between Income Fund and Multimanager Lifestyle

Assuming the 90 days horizon Income Fund is expected to generate 1.05 times less return on investment than Multimanager Lifestyle. But when comparing it to its historical volatility, Income Fund Of is 1.31 times less risky than Multimanager Lifestyle. It trades about 0.08 of its potential returns per unit of risk. Multimanager Lifestyle Growth is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,156  in Multimanager Lifestyle Growth on December 3, 2024 and sell it today you would earn a total of  270.00  from holding Multimanager Lifestyle Growth or generate 23.36% return on investment over 90 days.

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

Income Fund Of  vs.  Multimanager Lifestyle Growth

Income Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Income Fund Of has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Income Fund 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

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.

Pair Trading with Income Fund and Multimanager Lifestyle

The main advantage of trading using opposite Income Fund and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Fund 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 Income Fund Of 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.