Correlation Between Consumer Staples and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Consumer Staples and Dow Jones 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 Dow Jones 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 Dow Jones Industrial, you can compare the effects of market volatilities on Consumer Staples and Dow Jones 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 Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Staples and Dow Jones.
Diversification Opportunities for Consumer Staples and Dow Jones
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Consumer and Dow is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Staples Portfolio and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial 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 Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Consumer Staples i.e., Consumer Staples and Dow Jones go up and down completely randomly.
Pair Corralation between Consumer Staples and Dow Jones
Assuming the 90 days horizon Consumer Staples Portfolio is expected to generate 1.13 times more return on investment than Dow Jones. However, Consumer Staples is 1.13 times more volatile than Dow Jones Industrial. It trades about 0.15 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.0 per unit of risk. If you would invest 8,177 in Consumer Staples Portfolio on December 11, 2024 and sell it today you would earn a total of 466.00 from holding Consumer Staples Portfolio or generate 5.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Staples Portfolio vs. Dow Jones Industrial
Performance |
| Timeline |
Consumer Staples and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Consumer Staples Portfolio
Pair trading matchups for Consumer Staples
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Consumer Staples and Dow Jones
The main advantage of trading using opposite Consumer Staples and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Staples position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' 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 |
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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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