Correlation Between Materials Portfolio and Oil Equipment
Can any of the company-specific risk be diversified away by investing in both Materials Portfolio and Oil Equipment 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 Oil Equipment 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 Oil Equipment Services, you can compare the effects of market volatilities on Materials Portfolio and Oil Equipment 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 Oil Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Portfolio and Oil Equipment.
Diversification Opportunities for Materials Portfolio and Oil Equipment
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Materials and Oil is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Materials Portfolio Fidelity and Oil Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil Equipment Services 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 Oil Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil Equipment Services has no effect on the direction of Materials Portfolio i.e., Materials Portfolio and Oil Equipment go up and down completely randomly.
Pair Corralation between Materials Portfolio and Oil Equipment
Assuming the 90 days horizon Materials Portfolio is expected to generate 10.58 times less return on investment than Oil Equipment. But when comparing it to its historical volatility, Materials Portfolio Fidelity is 3.98 times less risky than Oil Equipment. It trades about 0.07 of its potential returns per unit of risk. Oil Equipment Services is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 8,491 in Oil Equipment Services on August 30, 2024 and sell it today you would earn a total of 1,306 from holding Oil Equipment Services or generate 15.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Materials Portfolio Fidelity vs. Oil Equipment Services
Performance |
| Timeline |
| Materials Portfolio |
| Oil Equipment Services |
Materials Portfolio and Oil Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Materials Portfolio and Oil Equipment
The main advantage of trading using opposite Materials Portfolio and Oil Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Portfolio position performs unexpectedly, Oil Equipment 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 Oil Equipment will offset losses from the drop in Oil Equipment's long position.| Materials Portfolio vs. Materials Portfolio Fidelity | Materials Portfolio vs. Fidelity Advisor Energy | Materials Portfolio vs. Materials Portfolio Fidelity | Materials Portfolio vs. Fidelity Advisor Real |
| Oil Equipment vs. Internet Ultrasector Profund | Oil Equipment vs. Semiconductor Ultrasector Profund | Oil Equipment vs. Pharmaceuticals Ultrasector Profund | Oil Equipment vs. Technology Ultrasector Profund |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios |