Correlation Between Multi Asset and Multifactor

Can any of the company-specific risk be diversified away by investing in both Multi Asset and Multifactor 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 Multifactor 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 Multifactor Equity Fund, you can compare the effects of market volatilities on Multi Asset and Multifactor 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 Multifactor. Check out your portfolio center. Please also check ongoing floating volatility patterns of Multi Asset and Multifactor.

Diversification Opportunities for Multi Asset and Multifactor

0.88

Correlation Coefficient

Multi Asset  Multifactor

Very poor diversification

The 3 months correlation between Multi and Multifactor is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Multi Asset Growth Strategy and Multifactor Equity Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multifactor Equity 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 Multifactor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multifactor Equity has no effect on the direction of Multi Asset i.e., Multi Asset and Multifactor go up and down completely randomly.

Pair Corralation between Multi Asset and Multifactor

Assuming the 90 days horizon Multi Asset is expected to generate 1.9 times less return on investment than Multifactor. But when comparing it to its historical volatility, Multi Asset Growth Strategy is 1.94 times less risky than Multifactor. It trades about 0.23 of its potential returns per unit of risk. Multifactor Equity Fund is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  1,481  in Multifactor Equity Fund on May 8, 2025 and sell it today you would earn a total of  165.00  from holding Multifactor Equity Fund or generate 11.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Multi Asset Growth Strategy  vs.  Multifactor Equity Fund

Multi Asset Growth

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Asset Growth Strategy are ranked lower than 18 (%) 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.

Multifactor Equity

Risk-Adjusted Performance

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 may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Multi Asset and Multifactor

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

The idea behind Multi Asset Growth Strategy and Multifactor Equity 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.