Correlation Between 1919 Financial and Basic Materials

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both 1919 Financial and Basic Materials 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 1919 Financial and Basic Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 1919 Financial Services and Basic Materials Ultrasector, you can compare the effects of market volatilities on 1919 Financial and Basic Materials 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 1919 Financial with a short position of Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1919 Financial and Basic Materials.

Diversification Opportunities for 1919 Financial and Basic Materials

1919BasicDiversified Away1919BasicDiversified Away100%
0.62
  Correlation Coefficient

Poor diversification

The 3 months correlation between 1919 and Basic is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding 1919 Financial Services and Basic Materials Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials Ultr and 1919 Financial 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 1919 Financial Services are associated (or correlated) with Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials Ultr has no effect on the direction of 1919 Financial i.e., 1919 Financial and Basic Materials go up and down completely randomly.

Pair Corralation between 1919 Financial and Basic Materials

Assuming the 90 days horizon 1919 Financial Services is expected to generate 1.43 times more return on investment than Basic Materials. However, 1919 Financial is 1.43 times more volatile than Basic Materials Ultrasector. It trades about -0.09 of its potential returns per unit of risk. Basic Materials Ultrasector is currently generating about -0.28 per unit of risk. If you would invest  3,135  in 1919 Financial Services on October 16, 2024 and sell it today you would lose (317.00) from holding 1919 Financial Services or give up 10.11% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

1919 Financial Services  vs.  Basic Materials Ultrasector

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -20-15-10-5051015
JavaScript chart by amCharts 3.21.15SBFAX BMPIX
       Timeline  
1919 Financial Services 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days 1919 Financial Services 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan293031323334
Basic Materials Ultr 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Basic Materials Ultrasector 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 forward 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.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan100105110115120125

1919 Financial and Basic Materials Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.77-2.08-1.38-0.680.00.671.342.022.69 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15SBFAX BMPIX
       Returns  

Pair Trading with 1919 Financial and Basic Materials

The main advantage of trading using opposite 1919 Financial and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1919 Financial position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.
The idea behind 1919 Financial Services and Basic Materials Ultrasector 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

Other Complementary Tools

Latest Portfolios
Quick portfolio dashboard that showcases your latest portfolios
Idea Analyzer
Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas
Portfolio Dashboard
Portfolio dashboard that provides centralized access to all your investments
Fundamental Analysis
View fundamental data based on most recent published financial statements
Insider Screener
Find insiders across different sectors to evaluate their impact on performance