Correlation Between Basic Materials and Fs Multi-strategy
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Fs Multi-strategy 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 Fs Multi-strategy 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 Fs Multi Strategy Alt, you can compare the effects of market volatilities on Basic Materials and Fs Multi-strategy 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 Fs Multi-strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Fs Multi-strategy.
Diversification Opportunities for Basic Materials and Fs Multi-strategy
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Basic and FSMSX is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials Fund and Fs Multi Strategy Alt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fs Multi Strategy 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 Fs Multi-strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fs Multi Strategy has no effect on the direction of Basic Materials i.e., Basic Materials and Fs Multi-strategy go up and down completely randomly.
Pair Corralation between Basic Materials and Fs Multi-strategy
Assuming the 90 days horizon Basic Materials Fund is expected to generate 5.67 times more return on investment than Fs Multi-strategy. However, Basic Materials is 5.67 times more volatile than Fs Multi Strategy Alt. It trades about 0.26 of its potential returns per unit of risk. Fs Multi Strategy Alt is currently generating about 0.27 per unit of risk. If you would invest 7,987 in Basic Materials Fund on April 14, 2025 and sell it today you would earn a total of 388.00 from holding Basic Materials Fund or generate 4.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Basic Materials Fund vs. Fs Multi Strategy Alt
Performance |
| Timeline |
| Basic Materials |
| Fs Multi Strategy |
Basic Materials and Fs Multi-strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Basic Materials and Fs Multi-strategy
The main advantage of trading using opposite Basic Materials and Fs Multi-strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Fs Multi-strategy 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 Fs Multi-strategy will offset losses from the drop in Fs Multi-strategy's long position.| Basic Materials vs. Energy Fund Investor | Basic Materials vs. Energy Services Fund | Basic Materials vs. Health Care Fund | Basic Materials vs. Banking Fund Investor |
| Fs Multi-strategy vs. Fs Multi Strategy Alt | Fs Multi-strategy vs. High Yield Fund | Fs Multi-strategy vs. Mfs Blended Research | Fs Multi-strategy vs. Royce Small Cap Value |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |