Correlation Between Financials Ultrasector and Consumer Staples
Can any of the company-specific risk be diversified away by investing in both Financials Ultrasector 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 Financials Ultrasector and Consumer Staples into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financials Ultrasector Profund and Consumer Staples Portfolio, you can compare the effects of market volatilities on Financials Ultrasector 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 Financials Ultrasector with a short position of Consumer Staples. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financials Ultrasector and Consumer Staples.
Diversification Opportunities for Financials Ultrasector and Consumer Staples
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Financials and Consumer is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Financials Ultrasector Profund and Consumer Staples Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Staples Por and Financials Ultrasector 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 Financials Ultrasector Profund 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 Por has no effect on the direction of Financials Ultrasector i.e., Financials Ultrasector and Consumer Staples go up and down completely randomly.
Pair Corralation between Financials Ultrasector and Consumer Staples
Assuming the 90 days horizon Financials Ultrasector Profund is expected to generate 1.98 times more return on investment than Consumer Staples. However, Financials Ultrasector is 1.98 times more volatile than Consumer Staples Portfolio. It trades about 0.09 of its potential returns per unit of risk. Consumer Staples Portfolio is currently generating about 0.03 per unit of risk. If you would invest 2,598 in Financials Ultrasector Profund on August 29, 2024 and sell it today you would earn a total of 1,960 from holding Financials Ultrasector Profund or generate 75.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financials Ultrasector Profund vs. Consumer Staples Portfolio
Performance |
| Timeline |
| Financials Ultrasector |
| Consumer Staples Por |
Financials Ultrasector and Consumer Staples Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financials Ultrasector and Consumer Staples
The main advantage of trading using opposite Financials Ultrasector and Consumer Staples positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financials Ultrasector 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.| Financials Ultrasector vs. Short Real Estate | Financials Ultrasector vs. Short Real Estate | Financials Ultrasector vs. Ultrashort Mid Cap Profund | Financials Ultrasector vs. Ultrashort Mid Cap Profund |
| Consumer Staples vs. Vanguard Financials Index | Consumer Staples vs. John Hancock Financial | Consumer Staples vs. Financials Ultrasector Profund | Consumer Staples vs. Blackrock Financial Institutions |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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