Correlation Between Materials Portfolio and Ab Value

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

By analyzing existing cross correlation between Materials Portfolio Fidelity and Ab Value Fund, you can compare the effects of market volatilities on Materials Portfolio and Ab Value 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 Materials Portfolio with a short position of Ab Value. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Portfolio and Ab Value.

Diversification Opportunities for Materials Portfolio and Ab Value

0.9

Correlation Coefficient

Materials Portfolio  Ab Value

Almost no diversification

The 3 months correlation between Materials and ABVCX is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Ab Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ab Value Fund and Materials Portfolio 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 Materials Portfolio Fidelity are associated (or correlated) with Ab Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ab Value Fund has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Ab Value go up and down completely randomly.

Pair Corralation between Materials Portfolio and Ab Value

Assuming the 90 days horizon Materials Portfolio Fidelity is expected to under-perform the Ab Value. But the mutual fund apears to be less risky and, when comparing its historical volatility, Materials Portfolio Fidelity is 1.17 times less risky than Ab Value. The mutual fund trades about -0.19 of its potential returns per unit of risk. The Ab Value Fund is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  2,075  in Ab Value Fund on November 28, 2024 and sell it today you would lose (268.00) from holding Ab Value Fund or give up 12.92% of portfolio value over 90 days.

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

Materials Portfolio Fidelity  vs.  Ab Value Fund

Materials Portfolio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Materials Portfolio Fidelity has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Ab Value Fund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ab Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Pair Trading with Materials Portfolio and Ab Value

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

The idea behind Materials Portfolio Fidelity and Ab Value Fund 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.