Correlation Between Rising Rates and Consumer Goods
Can any of the company-specific risk be diversified away by investing in both Rising Rates and Consumer Goods 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 Rising Rates and Consumer Goods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rising Rates Opportunity and Consumer Goods Ultrasector, you can compare the effects of market volatilities on Rising Rates and Consumer Goods 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 Rising Rates with a short position of Consumer Goods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rising Rates and Consumer Goods.
Diversification Opportunities for Rising Rates and Consumer Goods
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Rising and Consumer is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Rising Rates Opportunity and Consumer Goods Ultrasector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Goods Ultra and Rising Rates 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 Rising Rates Opportunity are associated (or correlated) with Consumer Goods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Goods Ultra has no effect on the direction of Rising Rates i.e., Rising Rates and Consumer Goods go up and down completely randomly.
Pair Corralation between Rising Rates and Consumer Goods
Assuming the 90 days horizon Rising Rates Opportunity is expected to under-perform the Consumer Goods. In addition to that, Rising Rates is 1.23 times more volatile than Consumer Goods Ultrasector. It trades about -0.02 of its total potential returns per unit of risk. Consumer Goods Ultrasector is currently generating about 0.11 per unit of volatility. If you would invest 6,205 in Consumer Goods Ultrasector on September 1, 2024 and sell it today you would earn a total of 1,912 from holding Consumer Goods Ultrasector or generate 30.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rising Rates Opportunity vs. Consumer Goods Ultrasector
Performance |
| Timeline |
| Rising Rates Opportunity |
| Consumer Goods Ultra |
Rising Rates and Consumer Goods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rising Rates and Consumer Goods
The main advantage of trading using opposite Rising Rates and Consumer Goods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rising Rates position performs unexpectedly, Consumer Goods 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 Goods will offset losses from the drop in Consumer Goods' long position.| Rising Rates vs. Legg Mason Partners | Rising Rates vs. Chestnut Street Exchange | Rising Rates vs. Blackrock Exchange Portfolio | Rising Rates vs. T Rowe Price |
| Consumer Goods vs. Consumer Services Ultrasector | Consumer Goods vs. Industrials Ultrasector Profund | Consumer Goods vs. Financials Ultrasector Profund | Consumer Goods vs. Health Care Ultrasector |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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