Correlation Between NOW and Select Sector
Can any of the company-specific risk be diversified away by investing in both NOW 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 NOW and Select Sector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NOW Inc and The Select Sector, you can compare the effects of market volatilities on NOW 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 NOW with a short position of Select Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOW and Select Sector.
Diversification Opportunities for NOW and Select Sector
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between NOW and Select is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NOW Inc and The Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Select Sector and NOW 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 NOW Inc 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 NOW i.e., NOW and Select Sector go up and down completely randomly.
Pair Corralation between NOW and Select Sector
If you would invest 159,394 in The Select Sector on August 27, 2024 and sell it today you would earn a total of 8,082 from holding The Select Sector or generate 5.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
NOW Inc vs. The Select Sector
Performance |
| Timeline |
| NOW Inc |
| Select Sector |
NOW and Select Sector Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NOW and Select Sector
The main advantage of trading using opposite NOW and Select Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOW 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.| NOW vs. Schlumberger Limited | NOW vs. The Select Sector | NOW vs. Promotora y Operadora | NOW vs. iShares Global Timber |
| Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard Tax Managed Funds | Select Sector vs. Vanguard International Equity |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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