Correlation Between Tax-managed International and Multi Manager

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

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

Diversification Opportunities for Tax-managed International and Multi Manager

0.93

Correlation Coefficient

Tax-managed International  Multi Manager

Almost no diversification

The 3 months correlation between Tax-managed and Multi is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Tax Managed International Equi and Multi Manager Directional Alte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Manager Direct and Tax-managed International 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 Tax Managed International Equity are associated (or correlated) with Multi Manager. 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 Direct has no effect on the direction of Tax-managed International i.e., Tax-managed International and Multi Manager go up and down completely randomly.

Pair Corralation between Tax-managed International and Multi Manager

Assuming the 90 days horizon Tax Managed International Equity is expected to under-perform the Multi Manager. In addition to that, Tax-managed International is 1.25 times more volatile than Multi Manager Directional Alternative. It trades about -0.02 of its total potential returns per unit of risk. Multi Manager Directional Alternative is currently generating about 0.04 per unit of volatility. If you would invest  811.00  in Multi Manager Directional Alternative on July 15, 2025 and sell it today you would earn a total of  4.00  from holding Multi Manager Directional Alternative or generate 0.49% return on investment over 90 days.

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

Tax Managed International Equi  vs.  Multi Manager Directional Alte

Tax-managed International

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Tax Managed International Equity are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Tax-managed International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Multi Manager Direct

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Manager Directional Alternative are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Multi Manager is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tax-managed International and Multi Manager

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

The idea behind Tax Managed International Equity and Multi Manager Directional Alternative 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.