Correlation Between Intermediate-term and Multi-asset Real

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

By analyzing existing cross correlation between Intermediate Term Tax Free Bond and Multi Asset Real Return, you can compare the effects of market volatilities on Intermediate-term and Multi-asset Real 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 Intermediate-term with a short position of Multi-asset Real. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intermediate-term and Multi-asset Real.

Diversification Opportunities for Intermediate-term and Multi-asset Real

0.63

Correlation Coefficient

Intermediate-term  Multi-asset Real

Poor diversification

The 3 months correlation between Intermediate-term and Multi-asset is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Intermediate Term Tax Free Bon 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 Intermediate-term 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 Intermediate Term Tax Free Bond are associated (or correlated) with Multi-asset Real. 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 Intermediate-term i.e., Intermediate-term and Multi-asset Real go up and down completely randomly.

Pair Corralation between Intermediate-term and Multi-asset Real

Assuming the 90 days horizon Intermediate-term is expected to generate 15.76 times less return on investment than Multi-asset Real. But when comparing it to its historical volatility, Intermediate Term Tax Free Bond is 10.23 times less risky than Multi-asset Real. It trades about 0.11 of its potential returns per unit of risk. Multi Asset Real Return is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,879  in Multi Asset Real Return on April 24, 2025 and sell it today you would earn a total of  259.00  from holding Multi Asset Real Return or generate 13.78% return on investment over 90 days.

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

Intermediate Term Tax Free Bon  vs.  Multi Asset Real Return

Intermediate Term Tax

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intermediate Term Tax Free Bond are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Intermediate-term is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Multi-asset Real showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intermediate-term and Multi-asset Real

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

The idea behind Intermediate Term Tax Free Bond 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.