Correlation Between Extended Market and Multi-manager Directional
Can any of the company-specific risk be diversified away by investing in both Extended Market and Multi-manager Directional 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 Extended Market and Multi-manager Directional into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Extended Market Index and Multi Manager Directional Alternative, you can compare the effects of market volatilities on Extended Market and Multi-manager Directional 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 Extended Market with a short position of Multi-manager Directional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Extended Market and Multi-manager Directional.
Diversification Opportunities for Extended Market and Multi-manager Directional
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Extended and Multi-manager is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Extended Market Index and Multi Manager Directional Alte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Multi-manager Directional and Extended Market 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 Extended Market Index are associated (or correlated) with Multi-manager Directional. 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 Directional has no effect on the direction of Extended Market i.e., Extended Market and Multi-manager Directional go up and down completely randomly.
Pair Corralation between Extended Market and Multi-manager Directional
Assuming the 90 days horizon Extended Market Index is expected to generate 2.28 times more return on investment than Multi-manager Directional. However, Extended Market is 2.28 times more volatile than Multi Manager Directional Alternative. It trades about 0.22 of its potential returns per unit of risk. Multi Manager Directional Alternative is currently generating about 0.2 per unit of risk. If you would invest 1,837 in Extended Market Index on April 25, 2025 and sell it today you would earn a total of 265.00 from holding Extended Market Index or generate 14.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Extended Market Index vs. Multi Manager Directional Alte
Performance |
| Timeline |
| Extended Market Index |
| Multi-manager Directional |
Extended Market and Multi-manager Directional Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Extended Market and Multi-manager Directional
The main advantage of trading using opposite Extended Market and Multi-manager Directional positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Extended Market position performs unexpectedly, Multi-manager Directional 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 Directional will offset losses from the drop in Multi-manager Directional's long position.| Extended Market vs. Ubs Series Funds | Extended Market vs. Cash Account Trust | Extended Market vs. American Funds Government | Extended Market vs. Morgan Stanley Institutional |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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