Correlation Between Sp Midcap and Multi-manager Global

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

By analyzing existing cross correlation between Sp Midcap Index and Multi Manager Global Real, you can compare the effects of market volatilities on Sp Midcap and Multi-manager Global 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 Sp Midcap with a short position of Multi-manager Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sp Midcap and Multi-manager Global.

Diversification Opportunities for Sp Midcap and Multi-manager Global

0.3

Correlation Coefficient

Sp Midcap  Multi-manager Global

Weak diversification

The 3 months correlation between SPMIX and Multi-manager is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sp Midcap Index and Multi Manager Global Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager Global and Sp Midcap 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 Sp Midcap Index are associated (or correlated) with Multi-manager Global. 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 Global has no effect on the direction of Sp Midcap i.e., Sp Midcap and Multi-manager Global go up and down completely randomly.

Pair Corralation between Sp Midcap and Multi-manager Global

Assuming the 90 days horizon Sp Midcap Index is expected to under-perform the Multi-manager Global. In addition to that, Sp Midcap is 1.17 times more volatile than Multi Manager Global Real. It trades about -0.07 of its total potential returns per unit of risk. Multi Manager Global Real is currently generating about -0.01 per unit of volatility. If you would invest  1,026  in Multi Manager Global Real on December 22, 2024 and sell it today you would lose (7.00) from holding Multi Manager Global Real or give up 0.68% of portfolio value over 90 days.

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

Sp Midcap Index  vs.  Multi Manager Global Real

Sp Midcap Index

Risk-Adjusted Performance

Very Weak

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

Multi Manager Global

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Sp Midcap and Multi-manager Global

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

The idea behind Sp Midcap Index and Multi Manager Global Real 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.