Correlation Between Multimanager Lifestyle and Chestnut Street

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

By analyzing existing cross correlation between Multimanager Lifestyle Aggressive and Chestnut Street Exchange, you can compare the effects of market volatilities on Multimanager Lifestyle and Chestnut Street 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 Chestnut Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multimanager Lifestyle and Chestnut Street.

Diversification Opportunities for Multimanager Lifestyle and Chestnut Street

0.88

Correlation Coefficient

Multimanager Lifestyle  Chestnut Street

Very poor diversification

The 3 months correlation between MULTIMANAGER and Chestnut is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Multimanager Lifestyle Aggress and Chestnut Street Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chestnut Street Exchange 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 Aggressive are associated (or correlated) with Chestnut Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chestnut Street Exchange has no effect on the direction of Multimanager Lifestyle i.e., Multimanager Lifestyle and Chestnut Street go up and down completely randomly.

Pair Corralation between Multimanager Lifestyle and Chestnut Street

Assuming the 90 days horizon Multimanager Lifestyle is expected to generate 1.39 times less return on investment than Chestnut Street. In addition to that, Multimanager Lifestyle is 1.01 times more volatile than Chestnut Street Exchange. It trades about 0.16 of its total potential returns per unit of risk. Chestnut Street Exchange is currently generating about 0.22 per unit of volatility. If you would invest  108,636  in Chestnut Street Exchange on September 4, 2024 and sell it today you would earn a total of  10,056  from holding Chestnut Street Exchange or generate 9.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Multimanager Lifestyle Aggress  vs.  Chestnut Street Exchange

Multimanager Lifestyle

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multimanager Lifestyle Aggressive are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Multimanager Lifestyle may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Chestnut Street Exchange

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chestnut Street Exchange are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Chestnut Street may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Multimanager Lifestyle and Chestnut Street

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

The idea behind Multimanager Lifestyle Aggressive and Chestnut Street Exchange 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.