Correlation Between Global Multi-strategy and Midcap Fund

Can any of the company-specific risk be diversified away by investing in both Global Multi-strategy and Midcap Fund 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 Global Multi-strategy and Midcap Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Multi Strategy Fund and Midcap Fund R 5, you can compare the effects of market volatilities on Global Multi-strategy and Midcap Fund 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 Global Multi-strategy with a short position of Midcap Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Multi-strategy and Midcap Fund.

Diversification Opportunities for Global Multi-strategy and Midcap Fund

0.74

Correlation Coefficient

Global Multi-strategy  Midcap Fund

Poor diversification

The 3 months correlation between GLOBAL and Midcap is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Global Multi Strategy Fund and Midcap Fund R 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Midcap Fund R and Global Multi-strategy 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 Global Multi Strategy Fund are associated (or correlated) with Midcap Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Midcap Fund R has no effect on the direction of Global Multi-strategy i.e., Global Multi-strategy and Midcap Fund go up and down completely randomly.

Pair Corralation between Global Multi-strategy and Midcap Fund

Assuming the 90 days horizon Global Multi Strategy Fund is expected to generate 0.2 times more return on investment than Midcap Fund. However, Global Multi Strategy Fund is 5.08 times less risky than Midcap Fund. It trades about 0.03 of its potential returns per unit of risk. Midcap Fund R 5 is currently generating about -0.02 per unit of risk. If you would invest  1,115  in Global Multi Strategy Fund on December 29, 2024 and sell it today you would earn a total of  4.00  from holding Global Multi Strategy Fund or generate 0.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Global Multi Strategy Fund  vs.  Midcap Fund R 5

Global Multi Strategy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Global Multi Strategy Fund are ranked lower than 2 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Global Multi-strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Midcap Fund R

Risk-Adjusted Performance

Very Weak

Over the last 90 days Midcap Fund R 5 has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Midcap Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Global Multi-strategy and Midcap Fund

The main advantage of trading using opposite Global Multi-strategy and Midcap Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Multi-strategy position performs unexpectedly, Midcap Fund 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 Midcap Fund will offset losses from the drop in Midcap Fund's long position.

The idea behind Global Multi Strategy Fund and Midcap Fund R 5 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.