Correlation Between Consumer Staples and Telecommunications
Can any of the company-specific risk be diversified away by investing in both Consumer Staples and Telecommunications 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 Telecommunications 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 Telecommunications Portfolio Fidelity, you can compare the effects of market volatilities on Consumer Staples and Telecommunications 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 Telecommunications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Staples and Telecommunications.
Diversification Opportunities for Consumer Staples and Telecommunications
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Consumer and Telecommunications is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Staples Portfolio and Telecommunications Portfolio F in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telecommunications 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 Telecommunications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telecommunications has no effect on the direction of Consumer Staples i.e., Consumer Staples and Telecommunications go up and down completely randomly.
Pair Corralation between Consumer Staples and Telecommunications
Assuming the 90 days horizon Consumer Staples is expected to generate 3.04 times less return on investment than Telecommunications. But when comparing it to its historical volatility, Consumer Staples Portfolio is 1.59 times less risky than Telecommunications. It trades about 0.05 of its potential returns per unit of risk. Telecommunications Portfolio Fidelity is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 4,024 in Telecommunications Portfolio Fidelity on September 2, 2024 and sell it today you would earn a total of 1,759 from holding Telecommunications Portfolio Fidelity or generate 43.71% 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. Telecommunications Portfolio F
Performance |
| Timeline |
| Consumer Staples Por |
| Telecommunications |
Consumer Staples and Telecommunications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Staples and Telecommunications
The main advantage of trading using opposite Consumer Staples and Telecommunications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Staples position performs unexpectedly, Telecommunications 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 Telecommunications will offset losses from the drop in Telecommunications' long position.| Consumer Staples vs. Fidelity Advisor Health | Consumer Staples vs. Fidelity Advisor Biotechnology | Consumer Staples vs. Materials Portfolio Fidelity | Consumer Staples vs. Consumer Staples Portfolio |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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