Correlation Between The Fixed and Multimedia Portfolio

Can any of the company-specific risk be diversified away by investing in both The Fixed and Multimedia Portfolio 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 The Fixed and Multimedia Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Fixed Income and Multimedia Portfolio Multimedia, you can compare the effects of market volatilities on The Fixed and Multimedia Portfolio 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 The Fixed with a short position of Multimedia Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of The Fixed and Multimedia Portfolio.

Diversification Opportunities for The Fixed and Multimedia Portfolio

0.28

Correlation Coefficient

The Fixed  Multimedia Portfolio

Modest diversification

The 3 months correlation between The and Multimedia is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding The Fixed Income and Multimedia Portfolio Multimedi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimedia Portfolio and The Fixed 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 The Fixed Income are associated (or correlated) with Multimedia Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multimedia Portfolio has no effect on the direction of The Fixed i.e., The Fixed and Multimedia Portfolio go up and down completely randomly.

Pair Corralation between The Fixed and Multimedia Portfolio

Assuming the 90 days horizon The Fixed is expected to generate 3.31 times less return on investment than Multimedia Portfolio. But when comparing it to its historical volatility, The Fixed Income is 3.34 times less risky than Multimedia Portfolio. It trades about 0.12 of its potential returns per unit of risk. Multimedia Portfolio Multimedia is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  6,113  in Multimedia Portfolio Multimedia on December 2, 2024 and sell it today you would earn a total of  5,484  from holding Multimedia Portfolio Multimedia or generate 89.71% return on investment over 90 days.

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

The Fixed Income  vs.  Multimedia Portfolio Multimedi

Fixed Income

Risk-Adjusted Performance

Very Weak

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

Multimedia Portfolio

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Multimedia Portfolio Multimedia are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multimedia Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with The Fixed and Multimedia Portfolio

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

The idea behind The Fixed Income and Multimedia Portfolio Multimedia 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.