Correlation Between Mutual Of and Basic Materials

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

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

Diversification Opportunities for Mutual Of and Basic Materials

0.88

Correlation Coefficient

Mutual Of  Basic Materials

Very poor diversification

The 3 months correlation between Mutual and Basic is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Mutual Of America and Basic Materials Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials Ultr and Mutual Of 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 Mutual Of America 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 Ultr has no effect on the direction of Mutual Of i.e., Mutual Of and Basic Materials go up and down completely randomly.

Pair Corralation between Mutual Of and Basic Materials

Assuming the 90 days horizon Mutual Of is expected to generate 1.35 times less return on investment than Basic Materials. But when comparing it to its historical volatility, Mutual Of America is 1.45 times less risky than Basic Materials. It trades about 0.05 of its potential returns per unit of risk. Basic Materials Ultrasector is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  10,302  in Basic Materials Ultrasector on May 13, 2025 and sell it today you would earn a total of  339.00  from holding Basic Materials Ultrasector or generate 3.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Mutual Of America  vs.  Basic Materials Ultrasector

Mutual Of America

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Mutual Of America are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward-looking signals, Mutual Of is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Basic Materials Ultr

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Basic Materials Ultrasector are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Basic Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mutual Of and Basic Materials

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

The idea behind Mutual Of America and Basic Materials Ultrasector 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.