Correlation Between SPDR SP and Consumer Discretionary
Can any of the company-specific risk be diversified away by investing in both SPDR SP and Consumer Discretionary 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 SPDR SP and Consumer Discretionary into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPDR SP Homebuilders and Consumer Discretionary Select, you can compare the effects of market volatilities on SPDR SP and Consumer Discretionary 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 SPDR SP with a short position of Consumer Discretionary. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR SP and Consumer Discretionary.
Diversification Opportunities for SPDR SP and Consumer Discretionary
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between SPDR and Consumer is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding SPDR SP Homebuilders and Consumer Discretionary Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Discretionary and SPDR SP 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 SPDR SP Homebuilders are associated (or correlated) with Consumer Discretionary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Discretionary has no effect on the direction of SPDR SP i.e., SPDR SP and Consumer Discretionary go up and down completely randomly.
Pair Corralation between SPDR SP and Consumer Discretionary
Considering the 90-day investment horizon SPDR SP is expected to generate 1.29 times less return on investment than Consumer Discretionary. In addition to that, SPDR SP is 1.36 times more volatile than Consumer Discretionary Select. It trades about 0.09 of its total potential returns per unit of risk. Consumer Discretionary Select is currently generating about 0.15 per unit of volatility. If you would invest 17,515 in Consumer Discretionary Select on August 30, 2024 and sell it today you would earn a total of 4,489 from holding Consumer Discretionary Select or generate 25.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPDR SP Homebuilders vs. Consumer Discretionary Select
Performance |
| Timeline |
| SPDR SP Homebuilders |
| Consumer Discretionary |
SPDR SP and Consumer Discretionary Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPDR SP and Consumer Discretionary
The main advantage of trading using opposite SPDR SP and Consumer Discretionary positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPDR SP position performs unexpectedly, Consumer Discretionary 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 Discretionary will offset losses from the drop in Consumer Discretionary's long position.| SPDR SP vs. iShares Home Construction | SPDR SP vs. SPDR SP Retail | SPDR SP vs. Materials Select Sector | SPDR SP vs. Industrial Select Sector |
| Consumer Discretionary vs. Consumer Staples Select | Consumer Discretionary vs. Industrial Select Sector | Consumer Discretionary vs. Materials Select Sector | Consumer Discretionary vs. Health Care Select |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |