Correlation Between Mast Global and Materials Select

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

By analyzing existing cross correlation between Mast Global Battery and Materials Select Sector, you can compare the effects of market volatilities on Mast Global and Materials Select 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 Mast Global with a short position of Materials Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mast Global and Materials Select.

Diversification Opportunities for Mast Global and Materials Select

0.28

Correlation Coefficient

Mast Global  Materials Select

Modest diversification

The 3 months correlation between Mast and Materials is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Mast Global Battery and Materials Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Select Sector and Mast Global 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 Mast Global Battery are associated (or correlated) with Materials Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Select Sector has no effect on the direction of Mast Global i.e., Mast Global and Materials Select go up and down completely randomly.

Pair Corralation between Mast Global and Materials Select

Allowing for the 90-day total investment horizon Mast Global Battery is expected to generate 1.51 times more return on investment than Materials Select. However, Mast Global is 1.51 times more volatile than Materials Select Sector. It trades about -0.05 of its potential returns per unit of risk. Materials Select Sector is currently generating about -0.52 per unit of risk. If you would invest  2,515  in Mast Global Battery on September 23, 2024 and sell it today you would lose (38.00) from holding Mast Global Battery or give up 1.51% of portfolio value over 90 days.

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

Mast Global Battery  vs.  Materials Select Sector

Mast Global Battery

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mast Global Battery are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Mast Global is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Materials Select Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Materials Select Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Etf's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Mast Global and Materials Select

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

The idea behind Mast Global Battery and Materials Select Sector 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.