Correlation Between MicroSectors FANG and Consumer Staples
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and Consumer Staples 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 MicroSectors FANG and Consumer Staples into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and Consumer Staples Select, you can compare the effects of market volatilities on MicroSectors FANG and Consumer Staples 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 MicroSectors FANG with a short position of Consumer Staples. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and Consumer Staples.
Diversification Opportunities for MicroSectors FANG and Consumer Staples
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between MicroSectors and Consumer is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and Consumer Staples Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Staples Select and MicroSectors FANG 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 MicroSectors FANG Index are associated (or correlated) with Consumer Staples. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Staples Select has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and Consumer Staples go up and down completely randomly.
Pair Corralation between MicroSectors FANG and Consumer Staples
Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the Consumer Staples. In addition to that, MicroSectors FANG is 7.28 times more volatile than Consumer Staples Select. It trades about -0.11 of its total potential returns per unit of risk. Consumer Staples Select is currently generating about 0.04 per unit of volatility. If you would invest 7,254 in Consumer Staples Select on September 4, 2024 and sell it today you would earn a total of 1,058 from holding Consumer Staples Select or generate 14.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. Consumer Staples Select
Performance |
| Timeline |
| MicroSectors FANG Index |
| Consumer Staples Select |
MicroSectors FANG and Consumer Staples Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and Consumer Staples
The main advantage of trading using opposite MicroSectors FANG and Consumer Staples positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, Consumer Staples 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 Staples will offset losses from the drop in Consumer Staples' long position.| MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. Direxion Daily Technology | MicroSectors FANG vs. Direxion Daily SP |
| Consumer Staples vs. Consumer Discretionary Select | Consumer Staples vs. Industrial Select Sector | Consumer Staples vs. Utilities Select Sector | Consumer Staples vs. Materials Select Sector |
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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