Correlation Between Basic Materials and Banking Fund
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Banking Fund 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 Banking Fund 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 Banking Fund Class, you can compare the effects of market volatilities on Basic Materials and Banking Fund 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 Banking Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Banking Fund.
Diversification Opportunities for Basic Materials and Banking Fund
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Basic and Banking is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials Fund and Banking Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banking Fund Class 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 Banking Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banking Fund Class has no effect on the direction of Basic Materials i.e., Basic Materials and Banking Fund go up and down completely randomly.
Pair Corralation between Basic Materials and Banking Fund
If you would invest 7,424 in Basic Materials Fund on September 12, 2024 and sell it today you would earn a total of 608.00 from holding Basic Materials Fund or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 0.4% |
| Values | Daily Returns |
Basic Materials Fund vs. Banking Fund Class
Performance |
| Timeline |
| Basic Materials |
| Banking Fund Class |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Basic Materials and Banking Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Basic Materials and Banking Fund
The main advantage of trading using opposite Basic Materials and Banking Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Banking Fund 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 Banking Fund will offset losses from the drop in Banking Fund's long position.| Basic Materials vs. Basic Materials Fund | Basic Materials vs. Basic Materials Fund | Basic Materials vs. Energy Services Fund | Basic Materials vs. Energy Fund Class |
| Banking Fund vs. Allianzgi Diversified Income | Banking Fund vs. Fulcrum Diversified Absolute | Banking Fund vs. Blackrock Conservative Prprdptfinstttnl | Banking Fund vs. Federated Hermes Conservative |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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