Correlation Between Rational Strategic and Multi-manager Directional

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

By analyzing existing cross correlation between Rational Strategic Allocation and Multi Manager Directional Alternative, you can compare the effects of market volatilities on Rational Strategic and Multi-manager Directional 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 Rational Strategic with a short position of Multi-manager Directional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rational Strategic and Multi-manager Directional.

Diversification Opportunities for Rational Strategic and Multi-manager Directional

0.84

Correlation Coefficient

Rational Strategic  Multi-manager Directional

Very poor diversification

The 3 months correlation between Rational and Multi-manager is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Rational Strategic Allocation and Multi Manager Directional Alte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi-manager Directional and Rational Strategic 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 Rational Strategic Allocation are associated (or correlated) with Multi-manager Directional. 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 Directional has no effect on the direction of Rational Strategic i.e., Rational Strategic and Multi-manager Directional go up and down completely randomly.

Pair Corralation between Rational Strategic and Multi-manager Directional

Assuming the 90 days horizon Rational Strategic Allocation is expected to under-perform the Multi-manager Directional. In addition to that, Rational Strategic is 2.55 times more volatile than Multi Manager Directional Alternative. It trades about -0.11 of its total potential returns per unit of risk. Multi Manager Directional Alternative is currently generating about -0.01 per unit of volatility. If you would invest  740.00  in Multi Manager Directional Alternative on December 22, 2024 and sell it today you would lose (6.00) from holding Multi Manager Directional Alternative or give up 0.81% of portfolio value over 90 days.

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

Rational Strategic Allocation  vs.  Multi Manager Directional Alte

Rational Strategic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rational Strategic Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Multi-manager Directional

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Rational Strategic and Multi-manager Directional

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

The idea behind Rational Strategic Allocation and Multi Manager Directional Alternative 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.