Correlation Between Materials Portfolio and Simt Large

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

Diversification Opportunities for Materials Portfolio and Simt Large

0.51

Correlation Coefficient

Materials Portfolio  Simt Large

Very weak diversification

The 3 months correlation between Materials and Simt is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Simt Large Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simt Large 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 Simt Large. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simt Large Cap has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Simt Large go up and down completely randomly.

Pair Corralation between Materials Portfolio and Simt Large

Assuming the 90 days horizon Materials Portfolio Fidelity is expected to under-perform the Simt Large. In addition to that, Materials Portfolio is 1.35 times more volatile than Simt Large Cap. It trades about -0.19 of its total potential returns per unit of risk. Simt Large Cap is currently generating about -0.14 per unit of volatility. If you would invest  2,837  in Simt Large Cap on September 17, 2024 and sell it today you would lose (40.00) from holding Simt Large Cap or give up 1.41% of portfolio value over 90 days.

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

Materials Portfolio Fidelity  vs.  Simt Large Cap

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 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.

Simt Large Cap

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Simt Large Cap are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Simt Large 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 Simt Large

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

The idea behind Materials Portfolio Fidelity and Simt Large 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.