Correlation Between Barclays PLC and Select Sector
Can any of the company-specific risk be diversified away by investing in both Barclays PLC and Select Sector 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 Barclays PLC and Select Sector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Barclays PLC and The Select Sector, you can compare the effects of market volatilities on Barclays PLC and Select Sector 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 Barclays PLC with a short position of Select Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Barclays PLC and Select Sector.
Diversification Opportunities for Barclays PLC and Select Sector
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Barclays and Select is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Barclays PLC and The Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Sector and Barclays PLC 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 Barclays PLC are associated (or correlated) with Select Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Select Sector has no effect on the direction of Barclays PLC i.e., Barclays PLC and Select Sector go up and down completely randomly.
Pair Corralation between Barclays PLC and Select Sector
Assuming the 90 days trading horizon Barclays PLC is expected to generate 1.2 times more return on investment than Select Sector. However, Barclays PLC is 1.2 times more volatile than The Select Sector. It trades about 0.07 of its potential returns per unit of risk. The Select Sector is currently generating about 0.03 per unit of risk. If you would invest 13,677 in Barclays PLC on September 4, 2024 and sell it today you would earn a total of 13,323 from holding Barclays PLC or generate 97.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Barclays PLC vs. The Select Sector
Performance |
| Timeline |
| Barclays PLC |
| Select Sector |
Barclays PLC and Select Sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Barclays PLC and Select Sector
The main advantage of trading using opposite Barclays PLC and Select Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barclays PLC position performs unexpectedly, Select Sector 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 Select Sector will offset losses from the drop in Select Sector's long position.| Barclays PLC vs. Monster Beverage Corp | Barclays PLC vs. Grupo Sports World | Barclays PLC vs. KB Home | Barclays PLC vs. Verizon Communications |
| Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard STAR Funds | Select Sector vs. SPDR SP 500 |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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