Correlation Between Multi Asset and Conservative Strategy

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

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

Diversification Opportunities for Multi Asset and Conservative Strategy

0.91

Correlation Coefficient

Multi Asset  Conservative Strategy

Almost no diversification

The 3 months correlation between Multi and Conservative is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Multi Asset Growth Strategy and Conservative Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conservative Strategy and Multi Asset 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 Multi Asset Growth Strategy are associated (or correlated) with Conservative Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conservative Strategy has no effect on the direction of Multi Asset i.e., Multi Asset and Conservative Strategy go up and down completely randomly.

Pair Corralation between Multi Asset and Conservative Strategy

Assuming the 90 days horizon Multi Asset is expected to generate 1.05 times less return on investment than Conservative Strategy. In addition to that, Multi Asset is 1.73 times more volatile than Conservative Strategy Fund. It trades about 0.05 of its total potential returns per unit of risk. Conservative Strategy Fund is currently generating about 0.08 per unit of volatility. If you would invest  882.00  in Conservative Strategy Fund on December 30, 2024 and sell it today you would earn a total of  13.00  from holding Conservative Strategy Fund or generate 1.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Multi Asset Growth Strategy  vs.  Conservative Strategy Fund

Multi Asset Growth

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Asset Growth Strategy are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Multi Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Conservative Strategy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Conservative Strategy Fund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Conservative Strategy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Multi Asset and Conservative Strategy

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

The idea behind Multi Asset Growth Strategy and Conservative Strategy Fund 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.