Correlation Between Materials Portfolio and Bright Rock

Can any of the company-specific risk be diversified away by investing in both Materials Portfolio and Bright Rock 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 Bright Rock 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 Bright Rock Mid, you can compare the effects of market volatilities on Materials Portfolio and Bright Rock 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 Bright Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Portfolio and Bright Rock.

Diversification Opportunities for Materials Portfolio and Bright Rock

0.43

Correlation Coefficient

Materials Portfolio  Bright Rock

Very weak diversification

The 3 months correlation between Materials and Bright is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Bright Rock Mid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Rock Mid 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 Bright Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Rock Mid has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Bright Rock go up and down completely randomly.

Pair Corralation between Materials Portfolio and Bright Rock

Assuming the 90 days horizon Materials Portfolio is expected to generate 6.25 times less return on investment than Bright Rock. In addition to that, Materials Portfolio is 1.29 times more volatile than Bright Rock Mid. It trades about 0.02 of its total potential returns per unit of risk. Bright Rock Mid is currently generating about 0.17 per unit of volatility. If you would invest  2,554  in Bright Rock Mid on September 14, 2024 and sell it today you would earn a total of  188.00  from holding Bright Rock Mid or generate 7.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Materials Portfolio Fidelity  vs.  Bright Rock Mid

Materials Portfolio

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Portfolio Fidelity are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Materials Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bright Rock Mid

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Rock Mid are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Bright Rock may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Materials Portfolio and Bright Rock

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

The idea behind Materials Portfolio Fidelity and Bright Rock Mid 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.