Correlation Between Materials Portfolio and Catalyst/millburn

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

Diversification Opportunities for Materials Portfolio and Catalyst/millburn

0.55

Correlation Coefficient

Materials Portfolio  Catalyst/millburn

Very weak diversification

The 3 months correlation between Materials and Catalyst/millburn is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Catalystmillburn Hedge Strateg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalystmillburn Hedge 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 Catalyst/millburn. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalystmillburn Hedge has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Catalyst/millburn go up and down completely randomly.

Pair Corralation between Materials Portfolio and Catalyst/millburn

Assuming the 90 days horizon Materials Portfolio Fidelity is expected to generate 1.96 times more return on investment than Catalyst/millburn. However, Materials Portfolio is 1.96 times more volatile than Catalystmillburn Hedge Strategy. It trades about 0.13 of its potential returns per unit of risk. Catalystmillburn Hedge Strategy is currently generating about 0.25 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	100.0%
Values	Daily Returns

Materials Portfolio Fidelity  vs.  Catalystmillburn Hedge Strateg

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.

Catalystmillburn Hedge

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Catalystmillburn Hedge Strategy are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, Catalyst/millburn may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Materials Portfolio and Catalyst/millburn

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

The idea behind Materials Portfolio Fidelity and Catalystmillburn Hedge Strategy 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.