Correlation Between Materialise and Assured Guaranty

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

By analyzing existing cross correlation between Materialise NV and Assured Guaranty, you can compare the effects of market volatilities on Materialise and Assured Guaranty 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 Materialise with a short position of Assured Guaranty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materialise and Assured Guaranty.

Diversification Opportunities for Materialise and Assured Guaranty

0.85

Correlation Coefficient

Materialise  Assured Guaranty

Very poor diversification

The 3 months correlation between Materialise and Assured is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Materialise NV and Assured Guaranty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assured Guaranty and Materialise 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 Materialise NV are associated (or correlated) with Assured Guaranty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assured Guaranty has no effect on the direction of Materialise i.e., Materialise and Assured Guaranty go up and down completely randomly.

Pair Corralation between Materialise and Assured Guaranty

Assuming the 90 days trading horizon Materialise NV is expected to generate 1.59 times more return on investment than Assured Guaranty. However, Materialise is 1.59 times more volatile than Assured Guaranty. It trades about 0.18 of its potential returns per unit of risk. Assured Guaranty is currently generating about 0.01 per unit of risk. If you would invest  645.00  in Materialise NV on September 19, 2024 and sell it today you would earn a total of  105.00  from holding Materialise NV or generate 16.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Materialise NV  vs.  Assured Guaranty

Materialise NV

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Materialise NV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Materialise unveiled solid returns over the last few months and may actually be approaching a breakup point.

Assured Guaranty

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Assured Guaranty are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Assured Guaranty reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Materialise and Assured Guaranty

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

The idea behind Materialise NV and Assured Guaranty 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.