Correlation Between Basic Materials and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Basic Materials 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 Basic Materials and Basic Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials Fund and Basic Materials Fund, you can compare the effects of market volatilities on Basic Materials and Basic Materials 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 Basic Materials with a short position of Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Basic Materials.
Diversification Opportunities for Basic Materials and Basic Materials
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Basic and BASIC is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials Fund and Basic Materials Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials and Basic Materials 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 Basic Materials Fund are associated (or correlated) with Basic Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Basic Materials has no effect on the direction of Basic Materials i.e., Basic Materials and Basic Materials go up and down completely randomly.
Pair Corralation between Basic Materials and Basic Materials
Assuming the 90 days horizon Basic Materials is expected to generate 1.05 times less return on investment than Basic Materials. But when comparing it to its historical volatility, Basic Materials Fund is 1.0 times less risky than Basic Materials. It trades about 0.06 of its potential returns per unit of risk. Basic Materials Fund is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,835 in Basic Materials Fund on September 2, 2024 and sell it today you would earn a total of 1,140 from holding Basic Materials Fund or generate 16.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Basic Materials Fund vs. Basic Materials Fund
Performance |
| Timeline |
| Basic Materials |
| Basic Materials |
Basic Materials and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Basic Materials and Basic Materials
The main advantage of trading using opposite Basic Materials and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Basic Materials 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 Basic Materials will offset losses from the drop in Basic Materials' long position.| Basic Materials vs. Energy Fund Class | Basic Materials vs. Consumer Products Fund | Basic Materials vs. Aquagold International | Basic Materials vs. Thrivent High Yield |
| Basic Materials vs. Energy Fund Class | Basic Materials vs. Energy Services Fund | Basic Materials vs. Health Care Fund | Basic Materials vs. Banking Fund Class |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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