Correlation Between Value Fund and Multi Asset

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

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

Diversification Opportunities for Value Fund and Multi Asset

0.87

Correlation Coefficient

Value Fund  Multi Asset

Very poor diversification

The 3 months correlation between Value and Multi is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Value Fund A and Multi Asset Real Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi Asset Real and Value Fund 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 Value Fund A 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 Real has no effect on the direction of Value Fund i.e., Value Fund and Multi Asset go up and down completely randomly.

Pair Corralation between Value Fund and Multi Asset

Assuming the 90 days horizon Value Fund is expected to generate 1.71 times less return on investment than Multi Asset. But when comparing it to its historical volatility, Value Fund A is 1.76 times less risky than Multi Asset. It trades about 0.16 of its potential returns per unit of risk. Multi Asset Real Return is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,943  in Multi Asset Real Return on May 2, 2025 and sell it today you would earn a total of  239.00  from holding Multi Asset Real Return or generate 12.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Value Fund A  vs.  Multi Asset Real Return

Value Fund A

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Value Fund A are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Value Fund may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Multi Asset Real

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Multi Asset Real Return are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Multi Asset showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Value Fund and Multi Asset

The main advantage of trading using opposite Value Fund and Multi Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Value Fund 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 Value Fund A and Multi Asset Real Return 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.