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 is expected to generate 1.36 times less return on investment than Commodities Strategy. But when comparing it to its historical volatility, Consumer Products Fund is 1.65 times less risky than Commodities Strategy. It trades about 0.1 of its potential returns per unit of risk. Commodities Strategy Fund is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,886 in Commodities Strategy Fund on August 28, 2024 and sell it today you would earn a total of 47.00 from holding Commodities Strategy Fund or generate 1.63% 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. Basic Materials Fund | Consumer Products vs. Nasdaq 100 Fund Class | Consumer Products vs. Health Care Fund | Consumer Products vs. Energy Fund Class |
| Commodities Strategy vs. Basic Materials Fund | Commodities Strategy vs. Basic Materials Fund | Commodities Strategy vs. Banking Fund Class | Commodities Strategy vs. Basic Materials 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Stocks Directory Find actively traded stocks across global markets | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |