Correlation Between Aggressive Growth and Materials Portfolio

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

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

Diversification Opportunities for Aggressive Growth and Materials Portfolio

0.8

Correlation Coefficient

Aggressive Growth  Materials Portfolio

Very poor diversification

The 3 months correlation between Aggressive and Materials is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Aggressive Growth Allocation and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio and Aggressive Growth 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 Aggressive Growth Allocation are associated (or correlated) with Materials Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Materials Portfolio has no effect on the direction of Aggressive Growth i.e., Aggressive Growth and Materials Portfolio go up and down completely randomly.

Pair Corralation between Aggressive Growth and Materials Portfolio

Assuming the 90 days horizon Aggressive Growth Allocation is expected to generate 0.61 times more return on investment than Materials Portfolio. However, Aggressive Growth Allocation is 1.64 times less risky than Materials Portfolio. It trades about 0.22 of its potential returns per unit of risk. Materials Portfolio Fidelity is currently generating about 0.12 per unit of risk. If you would invest  1,099  in Aggressive Growth Allocation on September 7, 2024 and sell it today you would earn a total of  84.00  from holding Aggressive Growth Allocation or generate 7.64% return on investment over 90 days.

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

Aggressive Growth Allocation  vs.  Materials Portfolio Fidelity

Aggressive Growth

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aggressive Growth Allocation are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Aggressive Growth may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Materials Portfolio

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Aggressive Growth and Materials Portfolio

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

The idea behind Aggressive Growth Allocation and Materials Portfolio Fidelity 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.