Correlation Between Materials Portfolio and Fidelity Natural

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

By analyzing existing cross correlation between Materials Portfolio Materials and Fidelity Natural Resources, you can compare the effects of market volatilities on Materials Portfolio and Fidelity Natural 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 Fidelity Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Portfolio and Fidelity Natural.

Diversification Opportunities for Materials Portfolio and Fidelity Natural

0.78

Correlation Coefficient

Materials Portfolio  Fidelity Natural

Poor diversification

The 3 months correlation between Materials and Fidelity is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Materials and Fidelity Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Natural Res 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 Materials are associated (or correlated) with Fidelity Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Natural Res has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Fidelity Natural go up and down completely randomly.

Pair Corralation between Materials Portfolio and Fidelity Natural

Assuming the 90 days horizon Materials Portfolio Materials is expected to generate 0.86 times more return on investment than Fidelity Natural. However, Materials Portfolio Materials is 1.16 times less risky than Fidelity Natural. It trades about 0.12 of its potential returns per unit of risk. Fidelity Natural Resources is currently generating about 0.07 per unit of risk. If you would invest  9,446  in Materials Portfolio Materials on September 8, 2024 and sell it today you would earn a total of  624.00  from holding Materials Portfolio Materials or generate 6.61% return on investment over 90 days.

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

Materials Portfolio Materials  vs.  Fidelity Natural Resources

Materials Portfolio

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Portfolio Materials are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Materials Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fidelity Natural Res

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Natural Resources are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Fidelity Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Materials Portfolio and Fidelity Natural

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

The idea behind Materials Portfolio Materials and Fidelity Natural Resources 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.