Correlation Between Energy Basic and Artisan Thematic

Can any of the company-specific risk be diversified away by investing in both Energy Basic and Artisan Thematic 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 Energy Basic and Artisan Thematic into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Energy Basic Materials and Artisan Thematic Fund, you can compare the effects of market volatilities on Energy Basic and Artisan Thematic 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 Energy Basic with a short position of Artisan Thematic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Basic and Artisan Thematic.

Diversification Opportunities for Energy Basic and Artisan Thematic

0.82

Correlation Coefficient

Energy Basic  Artisan Thematic

Very poor diversification

The 3 months correlation between Energy and Artisan is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Energy Basic Materials and Artisan Thematic Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artisan Thematic and Energy Basic 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 Energy Basic Materials are associated (or correlated) with Artisan Thematic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artisan Thematic has no effect on the direction of Energy Basic i.e., Energy Basic and Artisan Thematic go up and down completely randomly.

Pair Corralation between Energy Basic and Artisan Thematic

Assuming the 90 days horizon Energy Basic is expected to generate 64.18 times less return on investment than Artisan Thematic. But when comparing it to its historical volatility, Energy Basic Materials is 1.01 times less risky than Artisan Thematic. It trades about 0.0 of its potential returns per unit of risk. Artisan Thematic Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,645  in Artisan Thematic Fund on October 22, 2024 and sell it today you would earn a total of  623.00  from holding Artisan Thematic Fund or generate 37.87% return on investment over 90 days.

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

Energy Basic Materials  vs.  Artisan Thematic Fund

Energy Basic Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Basic Materials has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Energy Basic is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Artisan Thematic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Artisan Thematic Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Artisan Thematic is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Basic and Artisan Thematic

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

The idea behind Energy Basic Materials and Artisan Thematic Fund 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.