Correlation Between Qs Defensive and Basic Materials
Can any of the company-specific risk be diversified away by investing in both Qs Defensive 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 Qs Defensive and Basic Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Qs Defensive Growth and Basic Materials Fund, you can compare the effects of market volatilities on Qs Defensive 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 Qs Defensive with a short position of Basic Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qs Defensive and Basic Materials.
Diversification Opportunities for Qs Defensive and Basic Materials
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between LMLRX and Basic is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Qs Defensive Growth and Basic Materials Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Basic Materials and Qs Defensive 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 Qs Defensive Growth 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 Qs Defensive i.e., Qs Defensive and Basic Materials go up and down completely randomly.
Pair Corralation between Qs Defensive and Basic Materials
Assuming the 90 days horizon Qs Defensive is expected to generate 2.33 times less return on investment than Basic Materials. But when comparing it to its historical volatility, Qs Defensive Growth is 2.75 times less risky than Basic Materials. It trades about 0.26 of its potential returns per unit of risk. Basic Materials Fund is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 6,523 in Basic Materials Fund on April 29, 2025 and sell it today you would earn a total of 801.00 from holding Basic Materials Fund or generate 12.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Qs Defensive Growth vs. Basic Materials Fund
Performance |
| Timeline |
| Qs Defensive Growth |
| Basic Materials |
Qs Defensive and Basic Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Qs Defensive and Basic Materials
The main advantage of trading using opposite Qs Defensive and Basic Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qs Defensive 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.| Qs Defensive vs. Alpine Ultra Short | Qs Defensive vs. Calamos Longshort Fund | Qs Defensive vs. Chartwell Short Duration | Qs Defensive vs. Dreyfus Short Intermediate |
| Basic Materials vs. Artisan High Income | Basic Materials vs. Siit High Yield | Basic Materials vs. Ab High Income | Basic Materials vs. Msift High Yield |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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