Correlation Between Multimanager Lifestyle and Blue Chip

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

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

Diversification Opportunities for Multimanager Lifestyle and Blue Chip

0.51

Correlation Coefficient

Multimanager Lifestyle  Blue Chip

Very weak diversification

The 3 months correlation between Multimanager and Blue is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Multimanager Lifestyle Balance and Blue Chip Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Chip Growth and Multimanager Lifestyle 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 Multimanager Lifestyle Balanced are associated (or correlated) with Blue Chip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Chip Growth has no effect on the direction of Multimanager Lifestyle i.e., Multimanager Lifestyle and Blue Chip go up and down completely randomly.

Pair Corralation between Multimanager Lifestyle and Blue Chip

Assuming the 90 days horizon Multimanager Lifestyle is expected to generate 2.56 times less return on investment than Blue Chip. But when comparing it to its historical volatility, Multimanager Lifestyle Balanced is 2.2 times less risky than Blue Chip. It trades about 0.08 of its potential returns per unit of risk. Blue Chip Growth is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,539  in Blue Chip Growth on December 5, 2024 and sell it today you would earn a total of  2,081  from holding Blue Chip Growth or generate 58.8% return on investment over 90 days.

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

Multimanager Lifestyle Balance  vs.  Blue Chip Growth

Multimanager Lifestyle

Risk-Adjusted Performance

Very Weak

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

Blue Chip Growth

Risk-Adjusted Performance

Very Weak

Over the last 90 days Blue Chip Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Multimanager Lifestyle and Blue Chip

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

The idea behind Multimanager Lifestyle Balanced and Blue Chip 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.