Correlation Between Small Pany and Materials Portfolio

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

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

Diversification Opportunities for Small Pany and Materials Portfolio

-0.49

Correlation Coefficient

Small Pany  Materials Portfolio

Very good diversification

The 3 months correlation between Small and Materials is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Small Pany Growth and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio and Small Pany 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 Small Pany Growth are associated (or correlated) with Materials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Portfolio has no effect on the direction of Small Pany i.e., Small Pany and Materials Portfolio go up and down completely randomly.

Pair Corralation between Small Pany and Materials Portfolio

Assuming the 90 days horizon Small Pany Growth is expected to generate 1.57 times more return on investment than Materials Portfolio. However, Small Pany is 1.57 times more volatile than Materials Portfolio Fidelity. It trades about 0.2 of its potential returns per unit of risk. Materials Portfolio Fidelity is currently generating about -0.25 per unit of risk. If you would invest  1,262  in Small Pany Growth on October 13, 2024 and sell it today you would earn a total of  336.00  from holding Small Pany Growth or generate 26.62% return on investment over 90 days.

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

Small Pany Growth  vs.  Materials Portfolio Fidelity

Small Pany Growth

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Small Pany Growth are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Small Pany showed solid returns over the last few months and may actually be approaching a breakup point.

Materials Portfolio

Risk-Adjusted Performance

0 of 100

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

Pair Trading with Small Pany and Materials Portfolio

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

The idea behind Small Pany Growth and Materials Portfolio Fidelity 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.