Correlation Between Materials Portfolio and Delaware Small

Can any of the company-specific risk be diversified away by investing in both Materials Portfolio and Delaware Small 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 Delaware Small 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 Delaware Small Cap, you can compare the effects of market volatilities on Materials Portfolio and Delaware Small 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 Delaware Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Portfolio and Delaware Small.

Diversification Opportunities for Materials Portfolio and Delaware Small

0.37

Correlation Coefficient

Materials Portfolio  Delaware Small

Weak diversification

The 3 months correlation between Materials and Delaware is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Delaware Small Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delaware Small Cap 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 Delaware Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delaware Small Cap has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Delaware Small go up and down completely randomly.

Pair Corralation between Materials Portfolio and Delaware Small

Assuming the 90 days horizon Materials Portfolio is expected to generate 7.16 times less return on investment than Delaware Small. But when comparing it to its historical volatility, Materials Portfolio Fidelity is 1.33 times less risky than Delaware Small. It trades about 0.02 of its potential returns per unit of risk. Delaware Small Cap is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,000  in Delaware Small Cap on September 14, 2024 and sell it today you would earn a total of  242.00  from holding Delaware Small Cap or generate 8.07% return on investment over 90 days.

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

Materials Portfolio Fidelity  vs.  Delaware Small Cap

Materials Portfolio

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Materials Portfolio Fidelity 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, Materials Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Delaware Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delaware Small Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Delaware Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Materials Portfolio and Delaware Small

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

The idea behind Materials Portfolio Fidelity and Delaware Small Cap 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.