Fun With Mutual Fund Correlation Matrixes
Figure out which funds add diversification and which are simply duplication.
Even if you invest through a mutual fund supermarket, you probably own at least a couple of funds from the same fund family. There's nothing wrong with that, but when funds share the same analysts and the managers work together, you can end up with funds that behave similarly.
If the funds are moving in lock step, you aren't getting much diversification from that second fund. This is where the correlation matrix comes in. It's something you can run in Morningstar Direct, our institutional-level software platform. It looks at how closely fund returns have tracked one another over the trailing three years. I've run three special correlation matrixes to help you build a portfolio. You can look to see which funds have the highest correlation so that you know which ones are most duplicative. You can also look at which have the lowest correlation so you know which have the greatest diversification.
Russel Kinnel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.