Correlation Between Consumer Staples and Consumer Services
Can any of the company-specific risk be diversified away by investing in both Consumer Staples and Consumer Services 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 Consumer Staples and Consumer Services into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Staples Portfolio and Consumer Services Ultrasector, you can compare the effects of market volatilities on Consumer Staples and Consumer Services 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 Consumer Staples with a short position of Consumer Services. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Staples and Consumer Services.
Diversification Opportunities for Consumer Staples and Consumer Services
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Consumer and Consumer is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Staples Portfolio and Consumer Services Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Services and Consumer Staples 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 Consumer Staples Portfolio are associated (or correlated) with Consumer Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Services has no effect on the direction of Consumer Staples i.e., Consumer Staples and Consumer Services go up and down completely randomly.
Pair Corralation between Consumer Staples and Consumer Services
Assuming the 90 days horizon Consumer Staples Portfolio is expected to under-perform the Consumer Services. But the mutual fund apears to be less risky and, when comparing its historical volatility, Consumer Staples Portfolio is 1.39 times less risky than Consumer Services. The mutual fund trades about -0.3 of its potential returns per unit of risk. The Consumer Services Ultrasector is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7,700 in Consumer Services Ultrasector on October 24, 2024 and sell it today you would earn a total of 63.00 from holding Consumer Services Ultrasector or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Staples Portfolio vs. Consumer Services Ultrasector
Performance |
| Timeline |
| Consumer Staples Por |
| Consumer Services |
Consumer Staples and Consumer Services Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Staples and Consumer Services
The main advantage of trading using opposite Consumer Staples and Consumer Services positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Staples position performs unexpectedly, Consumer Services 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 Consumer Services will offset losses from the drop in Consumer Services' long position.| Consumer Staples vs. Fidelity Advisor Health | Consumer Staples vs. Fidelity Advisor New | Consumer Staples vs. Fidelity Advisor Technology | Consumer Staples vs. Consumer Staples Portfolio |
| Consumer Services vs. Rbc Small Cap | Consumer Services vs. Needham Aggressive Growth | Consumer Services vs. Rational Defensive Growth | Consumer Services vs. Qs Defensive Growth |
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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