Correlation Between Materials Portfolio and Rational Defensive

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

Diversification Opportunities for Materials Portfolio and Rational Defensive

-0.33

Correlation Coefficient

Materials Portfolio  Rational Defensive

Very good diversification

The 3 months correlation between Materials and Rational is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Rational Defensive Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Defensive 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 Rational Defensive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Defensive Growth has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Rational Defensive go up and down completely randomly.

Pair Corralation between Materials Portfolio and Rational Defensive

Assuming the 90 days horizon Materials Portfolio Fidelity is expected to under-perform the Rational Defensive. But the mutual fund apears to be less risky and, when comparing its historical volatility, Materials Portfolio Fidelity is 1.3 times less risky than Rational Defensive. The mutual fund trades about -0.67 of its potential returns per unit of risk. The Rational Defensive Growth is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,012  in Rational Defensive Growth on September 24, 2024 and sell it today you would earn a total of  18.00  from holding Rational Defensive Growth or generate 0.45% return on investment over 90 days.

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

Materials Portfolio Fidelity  vs.  Rational Defensive Growth

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 latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Rational Defensive Growth

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rational Defensive Growth are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Rational Defensive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Materials Portfolio and Rational Defensive

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

The idea behind Materials Portfolio Fidelity and Rational Defensive Growth 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.