Correlation Between Multifactor Equity and Tax Managed

Can any of the company-specific risk be diversified away by investing in both Multifactor Equity and Tax Managed 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 Multifactor Equity and Tax Managed into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Multifactor Equity Fund and Tax Managed International Equity, you can compare the effects of market volatilities on Multifactor Equity and Tax Managed 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 Multifactor Equity with a short position of Tax Managed. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multifactor Equity and Tax Managed.

Diversification Opportunities for Multifactor Equity and Tax Managed

-0.34

Correlation Coefficient

Multifactor Equity  Tax Managed

Very good diversification

The 3 months correlation between Multifactor and Tax is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Multifactor Equity Fund and Tax Managed International Equi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Managed Internat and Multifactor Equity 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 Multifactor Equity Fund are associated (or correlated) with Tax Managed. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Managed Internat has no effect on the direction of Multifactor Equity i.e., Multifactor Equity and Tax Managed go up and down completely randomly.

Pair Corralation between Multifactor Equity and Tax Managed

Assuming the 90 days horizon Multifactor Equity Fund is expected to generate 0.9 times more return on investment than Tax Managed. However, Multifactor Equity Fund is 1.11 times less risky than Tax Managed. It trades about 0.22 of its potential returns per unit of risk. Tax Managed International Equity is currently generating about 0.0 per unit of risk. If you would invest  1,900  in Multifactor Equity Fund on September 12, 2024 and sell it today you would earn a total of  190.00  from holding Multifactor Equity Fund or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Multifactor Equity Fund  vs.  Tax Managed International Equi

Multifactor Equity

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multifactor Equity Fund are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Multifactor Equity may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Tax Managed Internat

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Multifactor Equity and Tax Managed

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

The idea behind Multifactor Equity Fund and Tax Managed International Equity 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.