Correlation Between Consumer Products and Commodities Strategy
Can any of the company-specific risk be diversified away by investing in both Consumer Products and Commodities Strategy 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 Products and Commodities Strategy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Products Fund and Commodities Strategy Fund, you can compare the effects of market volatilities on Consumer Products and Commodities Strategy 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 Products with a short position of Commodities Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Products and Commodities Strategy.
Diversification Opportunities for Consumer Products and Commodities Strategy
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Consumer and Commodities is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Products Fund and Commodities Strategy Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commodities Strategy and Consumer Products 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 Products Fund are associated (or correlated) with Commodities Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commodities Strategy has no effect on the direction of Consumer Products i.e., Consumer Products and Commodities Strategy go up and down completely randomly.
Pair Corralation between Consumer Products and Commodities Strategy
Assuming the 90 days horizon Consumer Products Fund is expected to generate 0.58 times more return on investment than Commodities Strategy. However, Consumer Products Fund is 1.72 times less risky than Commodities Strategy. It trades about 0.22 of its potential returns per unit of risk. Commodities Strategy Fund is currently generating about 0.01 per unit of risk. If you would invest 5,343 in Consumer Products Fund on August 31, 2024 and sell it today you would earn a total of 146.00 from holding Consumer Products Fund or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Products Fund vs. Commodities Strategy Fund
Performance |
| Timeline |
| Consumer Products |
| Commodities Strategy |
Consumer Products and Commodities Strategy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Products and Commodities Strategy
The main advantage of trading using opposite Consumer Products and Commodities Strategy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Products position performs unexpectedly, Commodities Strategy 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 Commodities Strategy will offset losses from the drop in Commodities Strategy's long position.| Consumer Products vs. Health Care Fund | Consumer Products vs. Banking Fund Investor | Consumer Products vs. Retailing Fund Investor | Consumer Products vs. Financial Services Fund |
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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