Correlation Between Consumer Finance and Construction
Can any of the company-specific risk be diversified away by investing in both Consumer Finance and Construction 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 Finance and Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Finance Portfolio and Construction And Housing, you can compare the effects of market volatilities on Consumer Finance and Construction 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 Finance with a short position of Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Finance and Construction.
Diversification Opportunities for Consumer Finance and Construction
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Consumer and Construction is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Finance Portfolio and Construction And Housing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Construction And Housing and Consumer Finance 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 Finance Portfolio are associated (or correlated) with Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Construction And Housing has no effect on the direction of Consumer Finance i.e., Consumer Finance and Construction go up and down completely randomly.
Pair Corralation between Consumer Finance and Construction
Assuming the 90 days horizon Consumer Finance Portfolio is expected to generate 1.19 times more return on investment than Construction. However, Consumer Finance is 1.19 times more volatile than Construction And Housing. It trades about 0.3 of its potential returns per unit of risk. Construction And Housing is currently generating about 0.13 per unit of risk. If you would invest 1,819 in Consumer Finance Portfolio on August 28, 2024 and sell it today you would earn a total of 184.00 from holding Consumer Finance Portfolio or generate 10.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Finance Portfolio vs. Construction And Housing
Performance |
| Timeline |
| Consumer Finance Por |
| Construction And Housing |
Consumer Finance and Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Finance and Construction
The main advantage of trading using opposite Consumer Finance and Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Finance position performs unexpectedly, Construction 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 Construction will offset losses from the drop in Construction's long position.| Consumer Finance vs. Banking Portfolio Banking | Consumer Finance vs. Insurance Portfolio Insurance | Consumer Finance vs. Financial Services Portfolio | Consumer Finance vs. Automotive Portfolio Automotive |
| Construction vs. Automotive Portfolio Automotive | Construction vs. Consumer Discretionary Portfolio | Construction vs. Insurance Portfolio Insurance | Construction vs. Consumer Finance 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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