Correlation Between Active Portfolios and Multi Manager

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

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

Diversification Opportunities for Active Portfolios and Multi Manager

0.02

Correlation Coefficient

Active Portfolios  Multi Manager

Significant diversification

The 3 months correlation between Active and Multi is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Active Portfolios Multi Manage 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 Active Portfolios 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 Active Portfolios Multi Manager 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 Active Portfolios i.e., Active Portfolios and Multi Manager go up and down completely randomly.

Pair Corralation between Active Portfolios and Multi Manager

Assuming the 90 days horizon Active Portfolios Multi Manager is expected to under-perform the Multi Manager. But the mutual fund apears to be less risky and, when comparing its historical volatility, Active Portfolios Multi Manager is 4.9 times less risky than Multi Manager. The mutual fund trades about -0.49 of its potential returns per unit of risk. The Multi Manager Growth Strategies is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,100  in Multi Manager Growth Strategies on October 11, 2024 and sell it today you would lose (26.00) from holding Multi Manager Growth Strategies or give up 1.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Active Portfolios Multi Manage  vs.  Multi Manager Growth Strategie

Active Portfolios Multi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Active Portfolios Multi Manager has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Active Portfolios 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

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Manager Growth Strategies are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. 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 Active Portfolios and Multi Manager

The main advantage of trading using opposite Active Portfolios and Multi Manager positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Active Portfolios 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 Active Portfolios Multi Manager 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.