Correlation Between Materials Select and HJEN

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

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

Diversification Opportunities for Materials Select and HJEN

0.0

Correlation Coefficient

Materials Select  HJEN

Pay attention - limited upside

The 3 months correlation between Materials and HJEN is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Materials Select Sector and HJEN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HJEN and Materials Select 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 Materials Select Sector are associated (or correlated) with HJEN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HJEN has no effect on the direction of Materials Select i.e., Materials Select and HJEN go up and down completely randomly.

Pair Corralation between Materials Select and HJEN

If you would invest  8,340  in Materials Select Sector on December 30, 2024 and sell it today you would earn a total of  165.00  from holding Materials Select Sector or generate 1.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Materials Select Sector  vs.  HJEN

Materials Select Sector

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Select Sector are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Materials Select is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

HJEN

Risk-Adjusted Performance

Very Weak

Over the last 90 days HJEN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, HJEN is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Materials Select and HJEN

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

The idea behind Materials Select Sector and HJEN 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 CEOs Directory module to screen CEOs from public companies around the world.