Correlation Between Automotive Portfolio and Materials Portfolio

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

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

Diversification Opportunities for Automotive Portfolio and Materials Portfolio

-0.27

Correlation Coefficient

Automotive Portfolio  Materials Portfolio

Very good diversification

The 3 months correlation between Automotive and Materials is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Automotive Portfolio Automotiv and Materials Portfolio Fidelity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Materials Portfolio and Automotive 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 Automotive Portfolio Automotive 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 Automotive Portfolio i.e., Automotive Portfolio and Materials Portfolio go up and down completely randomly.

Pair Corralation between Automotive Portfolio and Materials Portfolio

Assuming the 90 days horizon Automotive Portfolio Automotive is expected to generate 1.14 times more return on investment than Materials Portfolio. However, Automotive Portfolio is 1.14 times more volatile than Materials Portfolio Fidelity. It trades about 0.03 of its potential returns per unit of risk. Materials Portfolio Fidelity is currently generating about 0.0 per unit of risk. If you would invest  5,220  in Automotive Portfolio Automotive on September 25, 2024 and sell it today you would earn a total of  365.00  from holding Automotive Portfolio Automotive or generate 6.99% return on investment over 90 days.

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

Automotive Portfolio Automotiv  vs.  Materials Portfolio Fidelity

Automotive Portfolio

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Automotive Portfolio Automotive are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Automotive Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Automotive Portfolio and Materials Portfolio

The main advantage of trading using opposite Automotive Portfolio and Materials Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automotive Portfolio 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 Automotive Portfolio Automotive 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.