Correlation Between Short Term and Multi Asset

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

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

Diversification Opportunities for Short Term and Multi Asset

0.73

Correlation Coefficient

Short Term  Multi Asset

Poor diversification

The 3 months correlation between Short and Multi is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Short Term Government Fund 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 Short 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 Short Term Government 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 Real has no effect on the direction of Short Term i.e., Short Term and Multi Asset go up and down completely randomly.

Pair Corralation between Short Term and Multi Asset

Assuming the 90 days horizon Short Term Government Fund is expected to under-perform the Multi Asset. But the mutual fund apears to be less risky and, when comparing its historical volatility, Short Term Government Fund is 11.5 times less risky than Multi Asset. The mutual fund trades about -0.11 of its potential returns per unit of risk. The Multi Asset Real Return is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,186  in Multi Asset Real Return on May 2, 2025 and sell it today you would lose (4.00) from holding Multi Asset Real Return or give up 0.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Short Term Government Fund  vs.  Multi Asset Real Return

Short Term Government

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Short Term Government Fund are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Short 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 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 Short Term and Multi Asset

The main advantage of trading using opposite Short Term and Multi Asset positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Short Term 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 Short Term Government Fund 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.