Correlation Between Materials Portfolio and Queens Road

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

Diversification Opportunities for Materials Portfolio and Queens Road

0.9

Correlation Coefficient

Materials Portfolio  Queens Road

Almost no diversification

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

Pair Corralation between Materials Portfolio and Queens Road

Assuming the 90 days horizon Materials Portfolio Fidelity is expected to generate 1.28 times more return on investment than Queens Road. However, Materials Portfolio is 1.28 times more volatile than Queens Road Small. It trades about -0.18 of its potential returns per unit of risk. Queens Road Small is currently generating about -0.27 per unit of risk. If you would invest  8,834  in Materials Portfolio Fidelity on December 10, 2024 and sell it today you would lose (413.00) from holding Materials Portfolio Fidelity or give up 4.68% 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.  Queens Road Small

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 April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Queens Road Small

Risk-Adjusted Performance

Very Weak

Over the last 90 days Queens Road Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Materials Portfolio and Queens Road

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

The idea behind Materials Portfolio Fidelity and Queens Road Small 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.