Correlation Between Moderate Balanced and Managed Account

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

By analyzing existing cross correlation between Moderate Balanced Allocation and Managed Account Series, you can compare the effects of market volatilities on Moderate Balanced and Managed Account 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 Moderate Balanced with a short position of Managed Account. Check out your portfolio center. Please also check ongoing floating volatility patterns of Moderate Balanced and Managed Account.

Diversification Opportunities for Moderate Balanced and Managed Account

0.68

Correlation Coefficient

Moderate Balanced  Managed Account

Poor diversification

The 3 months correlation between MODERATE and Managed is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Moderate Balanced Allocation and Managed Account Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Managed Account Series and Moderate Balanced 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 Moderate Balanced Allocation are associated (or correlated) with Managed Account. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Managed Account Series has no effect on the direction of Moderate Balanced i.e., Moderate Balanced and Managed Account go up and down completely randomly.

Pair Corralation between Moderate Balanced and Managed Account

Assuming the 90 days horizon Moderate Balanced Allocation is expected to generate 2.82 times more return on investment than Managed Account. However, Moderate Balanced is 2.82 times more volatile than Managed Account Series. It trades about 0.04 of its potential returns per unit of risk. Managed Account Series is currently generating about 0.05 per unit of risk. If you would invest  1,185  in Moderate Balanced Allocation on October 25, 2024 and sell it today you would earn a total of  19.00  from holding Moderate Balanced Allocation or generate 1.6% return on investment over 90 days.

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

Moderate Balanced Allocation  vs.  Managed Account Series

Moderate Balanced

Risk-Adjusted Performance

3 of 100

Weak

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

Managed Account Series

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Moderate Balanced and Managed Account

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

The idea behind Moderate Balanced Allocation and Managed Account Series 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.