Correlation Between Adams Natural and Multi Manager
Can any of the company-specific risk be diversified away by investing in both Adams Natural and Multi Manager 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 Adams Natural and Multi Manager into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adams Natural Resources and Multi Manager Directional Alternative, you can compare the effects of market volatilities on Adams Natural and Multi Manager 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 Adams Natural with a short position of Multi Manager. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Natural and Multi Manager.
Diversification Opportunities for Adams Natural and Multi Manager
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Adams and Multi is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Adams Natural Resources and Multi Manager Directional Alte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager Direct and Adams Natural 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 Adams Natural Resources are associated (or correlated) with Multi Manager. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Manager Direct has no effect on the direction of Adams Natural i.e., Adams Natural and Multi Manager go up and down completely randomly.
Pair Corralation between Adams Natural and Multi Manager
Considering the 90-day investment horizon Adams Natural Resources is expected to under-perform the Multi Manager. But the fund apears to be less risky and, when comparing its historical volatility, Adams Natural Resources is 2.05 times less risky than Multi Manager. The fund trades about -0.18 of its potential returns per unit of risk. The Multi Manager Directional Alternative is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 771.00 in Multi Manager Directional Alternative on September 23, 2024 and sell it today you would lose (32.00) from holding Multi Manager Directional Alternative or give up 4.15% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Adams Natural Resources vs. Multi Manager Directional Alte
Performance |
Timeline |
Adams Natural Resources |
Multi Manager Direct |
Adams Natural and Multi Manager Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Adams Natural and Multi Manager
The main advantage of trading using opposite Adams Natural and Multi Manager positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Natural position performs unexpectedly, Multi Manager 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 Multi Manager will offset losses from the drop in Multi Manager's long position.Adams Natural vs. Liberty All Star | Adams Natural vs. Tri Continental Closed | Adams Natural vs. Royce Value Closed | Adams Natural vs. Central Securities |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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