Correlation Between Money Market and Multimanager Lifestyle

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

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

Diversification Opportunities for Money Market and Multimanager Lifestyle

0.0

Correlation Coefficient

Money Market  Multimanager Lifestyle

Pay attention - limited upside

The 3 months correlation between Money and Multimanager is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Money Market Obligations and Multimanager Lifestyle Aggress in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multimanager Lifestyle and Money Market 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 Money Market Obligations 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 Money Market i.e., Money Market and Multimanager Lifestyle go up and down completely randomly.

Pair Corralation between Money Market and Multimanager Lifestyle

Assuming the 90 days horizon Money Market Obligations is expected to generate 19.3 times more return on investment than Multimanager Lifestyle. However, Money Market is 19.3 times more volatile than Multimanager Lifestyle Aggressive. It trades about 0.05 of its potential returns per unit of risk. Multimanager Lifestyle Aggressive is currently generating about 0.06 per unit of risk. If you would invest  179.00  in Money Market Obligations on October 9, 2024 and sell it today you would lose (79.00) from holding Money Market Obligations or give up 44.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Money Market Obligations  vs.  Multimanager Lifestyle Aggress

Money Market Obligations

Risk-Adjusted Performance

0 of 100

Very Weak

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

Multimanager Lifestyle

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Money Market and Multimanager Lifestyle

The main advantage of trading using opposite Money Market and Multimanager Lifestyle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Money Market 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 Money Market Obligations and Multimanager Lifestyle Aggressive 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.