Correlation Between Select Equity and Multi Asset

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

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

Diversification Opportunities for Select Equity and Multi Asset

0.98

Correlation Coefficient

Select Equity  Multi Asset

Almost no diversification

The 3 months correlation between Select and Multi is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Select Equity Fund and Multi Asset Growth Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Asset Growth and Select 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 Select Equity Fund are associated (or correlated) with Multi Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Multi Asset Growth has no effect on the direction of Select Equity i.e., Select Equity and Multi Asset go up and down completely randomly.

Pair Corralation between Select Equity and Multi Asset

Assuming the 90 days horizon Select Equity Fund is expected to generate 2.0 times more return on investment than Multi Asset. However, Select Equity is 2.0 times more volatile than Multi Asset Growth Strategy. It trades about 0.25 of its potential returns per unit of risk. Multi Asset Growth Strategy is currently generating about 0.26 per unit of risk. If you would invest  1,471  in Select Equity Fund on May 2, 2025 and sell it today you would earn a total of  174.00  from holding Select Equity Fund or generate 11.83% return on investment over 90 days.

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

Select Equity Fund  vs.  Multi Asset Growth Strategy

Select Equity

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Select Equity Fund are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Select Equity may actually be approaching a critical reversion point that can send shares even higher in August 2025.

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 20 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multi Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Select Equity and Multi Asset

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

The idea behind Select Equity Fund and Multi Asset Growth Strategy 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..