Correlation Between Regional Bank and Multimanager Lifestyle

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Can any of the company-specific risk be diversified away by investing in both Regional Bank 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 Regional Bank and Multimanager Lifestyle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Regional Bank Fund and Multimanager Lifestyle Balanced, you can compare the effects of market volatilities on Regional Bank 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 Regional Bank with a short position of Multimanager Lifestyle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Bank and Multimanager Lifestyle.

Diversification Opportunities for Regional Bank and Multimanager Lifestyle

RegionalMultimanagerDiversified AwayRegionalMultimanagerDiversified Away100%
0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Regional and Multimanager is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Regional Bank Fund and Multimanager Lifestyle Balance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle and Regional Bank 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 Regional Bank Fund 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 Regional Bank i.e., Regional Bank and Multimanager Lifestyle go up and down completely randomly.

Pair Corralation between Regional Bank and Multimanager Lifestyle

Assuming the 90 days horizon Regional Bank Fund is expected to under-perform the Multimanager Lifestyle. In addition to that, Regional Bank is 3.04 times more volatile than Multimanager Lifestyle Balanced. It trades about -0.18 of its total potential returns per unit of risk. Multimanager Lifestyle Balanced is currently generating about 0.0 per unit of volatility. If you would invest  1,367  in Multimanager Lifestyle Balanced on November 24, 2024 and sell it today you would lose (2.00) from holding Multimanager Lifestyle Balanced or give up 0.15% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Regional Bank Fund  vs.  Multimanager Lifestyle Balance

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -5051015
JavaScript chart by amCharts 3.21.15JRBFX JQLBX
       Timeline  
Regional Bank 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Regional Bank Fund 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb28293031323334
Multimanager Lifestyle 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb13.213.313.413.513.613.713.8

Regional Bank and Multimanager Lifestyle Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.61-2.0-1.38-0.77-0.150.410.981.552.12 0.51.01.5
JavaScript chart by amCharts 3.21.15JRBFX JQLBX
       Returns  

Pair Trading with Regional Bank and Multimanager Lifestyle

The main advantage of trading using opposite Regional Bank and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Bank 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 Regional Bank Fund and Multimanager Lifestyle Balanced 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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