Correlation Between Materials Portfolio and Europacific Growth

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

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

Diversification Opportunities for Materials Portfolio and Europacific Growth

0.42

Correlation Coefficient

Materials Portfolio  Europacific Growth

Very weak diversification

The 3 months correlation between Materials and Europacific is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Europacific Growth Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Europacific Growth and Materials Portfolio 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 Portfolio Fidelity are associated (or correlated) with Europacific Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Europacific Growth has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Europacific Growth go up and down completely randomly.

Pair Corralation between Materials Portfolio and Europacific Growth

Assuming the 90 days horizon Materials Portfolio Fidelity is expected to generate 1.16 times more return on investment than Europacific Growth. However, Materials Portfolio is 1.16 times more volatile than Europacific Growth Fund. It trades about 0.13 of its potential returns per unit of risk. Europacific Growth Fund is currently generating about 0.02 per unit of risk. If you would invest  9,535  in Materials Portfolio Fidelity on September 4, 2024 and sell it today you would earn a total of  698.00  from holding Materials Portfolio Fidelity or generate 7.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Materials Portfolio Fidelity  vs.  Europacific Growth Fund

Materials Portfolio

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Portfolio Fidelity are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Materials Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Europacific Growth

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Europacific Growth Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Europacific Growth is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Materials Portfolio and Europacific Growth

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

The idea behind Materials Portfolio Fidelity and Europacific Growth 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..