Correlation Between Industrials Portfolio and Sp 500
Can any of the company-specific risk be diversified away by investing in both Industrials Portfolio and Sp 500 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 Industrials Portfolio and Sp 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrials Portfolio Industrials and Sp 500 Index, you can compare the effects of market volatilities on Industrials Portfolio and Sp 500 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 Industrials Portfolio with a short position of Sp 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrials Portfolio and Sp 500.
Diversification Opportunities for Industrials Portfolio and Sp 500
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Industrials and USPRX is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Industrials Portfolio Industri and Sp 500 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sp 500 Index and Industrials Portfolio 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 Industrials Portfolio Industrials are associated (or correlated) with Sp 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sp 500 Index has no effect on the direction of Industrials Portfolio i.e., Industrials Portfolio and Sp 500 go up and down completely randomly.
Pair Corralation between Industrials Portfolio and Sp 500
Assuming the 90 days horizon Industrials Portfolio Industrials is expected to generate 1.63 times more return on investment than Sp 500. However, Industrials Portfolio is 1.63 times more volatile than Sp 500 Index. It trades about 0.24 of its potential returns per unit of risk. Sp 500 Index is currently generating about 0.18 per unit of risk. If you would invest 4,298 in Industrials Portfolio Industrials on August 30, 2024 and sell it today you would earn a total of 326.00 from holding Industrials Portfolio Industrials or generate 7.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrials Portfolio Industri vs. Sp 500 Index
Performance |
| Timeline |
| Industrials Portfolio |
| Sp 500 Index |
Industrials Portfolio and Sp 500 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrials Portfolio and Sp 500
The main advantage of trading using opposite Industrials Portfolio and Sp 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrials Portfolio position performs unexpectedly, Sp 500 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 Sp 500 will offset losses from the drop in Sp 500's long position.The idea behind Industrials Portfolio Industrials and Sp 500 Index 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.
| Sp 500 vs. Small Cap Stock | Sp 500 vs. Extended Market Index | Sp 500 vs. Value Fund Value | Sp 500 vs. Income Stock Fund |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
Other Complementary Tools
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| 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 | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like |