Correlation Between Simt Large and Materials Portfolio

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

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

Diversification Opportunities for Simt Large and Materials Portfolio

0.51

Correlation Coefficient

Simt Large  Materials Portfolio

Very weak diversification

The 3 months correlation between Simt and Materials is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Simt Large Cap and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio and Simt Large 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 Simt Large Cap 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 Simt Large i.e., Simt Large and Materials Portfolio go up and down completely randomly.

Pair Corralation between Simt Large and Materials Portfolio

Assuming the 90 days horizon Simt Large Cap is expected to generate 0.71 times more return on investment than Materials Portfolio. However, Simt Large Cap is 1.41 times less risky than Materials Portfolio. It trades about 0.05 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  2,341  in Simt Large Cap on September 17, 2024 and sell it today you would earn a total of  456.00  from holding Simt Large Cap or generate 19.48% return on investment over 90 days.

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

Simt Large Cap  vs.  Materials Portfolio Fidelity

Simt Large Cap

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Large Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Simt Large is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 fairly strong technical and 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 Simt Large and Materials Portfolio

The main advantage of trading using opposite Simt Large and Materials Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simt Large 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 Simt Large Cap 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.