Correlation Between Pear Tree and Materials Portfolio

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

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

Diversification Opportunities for Pear Tree and Materials Portfolio

0.29

Correlation Coefficient

Pear Tree  Materials Portfolio

Modest diversification

The 3 months correlation between Pear and Materials is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Pear Tree Polaris and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio and Pear Tree 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 Pear Tree Polaris 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 Pear Tree i.e., Pear Tree and Materials Portfolio go up and down completely randomly.

Pair Corralation between Pear Tree and Materials Portfolio

Assuming the 90 days horizon Pear Tree Polaris is expected to generate 0.79 times more return on investment than Materials Portfolio. However, Pear Tree Polaris is 1.26 times less risky than Materials Portfolio. It trades about 0.15 of its potential returns per unit of risk. Materials Portfolio Fidelity is currently generating about 0.02 per unit of risk. If you would invest  2,233  in Pear Tree Polaris on December 30, 2024 and sell it today you would earn a total of  165.00  from holding Pear Tree Polaris or generate 7.39% return on investment over 90 days.

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

Pear Tree Polaris  vs.  Materials Portfolio Fidelity

Pear Tree Polaris

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pear Tree Polaris are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Pear Tree may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Materials Portfolio

Risk-Adjusted Performance

Weak

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 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.

Pair Trading with Pear Tree and Materials Portfolio

The main advantage of trading using opposite Pear Tree and Materials Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pear Tree 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 Pear Tree Polaris 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.