Correlation Between Consumer Products and Strengthening Dollar
Can any of the company-specific risk be diversified away by investing in both Consumer Products and Strengthening Dollar 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 Strengthening Dollar 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 Strengthening Dollar 2x, you can compare the effects of market volatilities on Consumer Products and Strengthening Dollar 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 Strengthening Dollar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Products and Strengthening Dollar.
Diversification Opportunities for Consumer Products and Strengthening Dollar
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Consumer and Strengthening is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Products Fund and Strengthening Dollar 2x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strengthening Dollar 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 Strengthening Dollar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strengthening Dollar has no effect on the direction of Consumer Products i.e., Consumer Products and Strengthening Dollar go up and down completely randomly.
Pair Corralation between Consumer Products and Strengthening Dollar
Assuming the 90 days horizon Consumer Products is expected to generate 1.54 times less return on investment than Strengthening Dollar. But when comparing it to its historical volatility, Consumer Products Fund is 1.96 times less risky than Strengthening Dollar. It trades about 0.22 of its potential returns per unit of risk. Strengthening Dollar 2x is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 6,441 in Strengthening Dollar 2x on August 31, 2024 and sell it today you would earn a total of 269.00 from holding Strengthening Dollar 2x or generate 4.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Products Fund vs. Strengthening Dollar 2x
Performance |
| Timeline |
| Consumer Products |
| Strengthening Dollar |
Consumer Products and Strengthening Dollar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Products and Strengthening Dollar
The main advantage of trading using opposite Consumer Products and Strengthening Dollar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Products position performs unexpectedly, Strengthening Dollar 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 Strengthening Dollar will offset losses from the drop in Strengthening Dollar'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 |
| Strengthening Dollar vs. Rising Dollar Profund | Strengthening Dollar vs. Strengthening Dollar 2x | Strengthening Dollar vs. Strengthening Dollar 2x | Strengthening Dollar vs. Short Real Estate |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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