Correlation Between Consumer Staples and Consumer Discretionary
Can any of the company-specific risk be diversified away by investing in both Consumer Staples and Consumer Discretionary 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 Discretionary 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 Discretionary Portfolio, you can compare the effects of market volatilities on Consumer Staples and Consumer Discretionary 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 Discretionary. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Staples and Consumer Discretionary.
Diversification Opportunities for Consumer Staples and Consumer Discretionary
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Consumer and Consumer is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Staples Portfolio and Consumer Discretionary Portfol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Discretionary 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 Discretionary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Discretionary has no effect on the direction of Consumer Staples i.e., Consumer Staples and Consumer Discretionary go up and down completely randomly.
Pair Corralation between Consumer Staples and Consumer Discretionary
Assuming the 90 days horizon Consumer Staples is expected to generate 19.73 times less return on investment than Consumer Discretionary. But when comparing it to its historical volatility, Consumer Staples Portfolio is 1.47 times less risky than Consumer Discretionary. It trades about 0.03 of its potential returns per unit of risk. Consumer Discretionary Portfolio is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest 6,473 in Consumer Discretionary Portfolio on August 28, 2024 and sell it today you would earn a total of 631.00 from holding Consumer Discretionary Portfolio or generate 9.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Staples Portfolio vs. Consumer Discretionary Portfol
Performance |
| Timeline |
| Consumer Staples Por |
| Consumer Discretionary |
Consumer Staples and Consumer Discretionary Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Staples and Consumer Discretionary
The main advantage of trading using opposite Consumer Staples and Consumer Discretionary positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Staples position performs unexpectedly, Consumer Discretionary 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 Discretionary will offset losses from the drop in Consumer Discretionary's long position.| Consumer Staples vs. Kellanova | Consumer Staples vs. Bunge Limited | Consumer Staples vs. BJs Wholesale Club | Consumer Staples vs. Colgate Palmolive |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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