Correlation Between Materials Select and IShares Consumer
Can any of the company-specific risk be diversified away by investing in both Materials Select and IShares Consumer 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 Materials Select and IShares Consumer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Materials Select Sector and iShares Consumer Staples, you can compare the effects of market volatilities on Materials Select and IShares Consumer 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 Materials Select with a short position of IShares Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Materials Select and IShares Consumer.
Diversification Opportunities for Materials Select and IShares Consumer
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Materials and IShares is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Materials Select Sector and iShares Consumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Consumer Staples and Materials Select 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 Materials Select Sector are associated (or correlated) with IShares Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Consumer Staples has no effect on the direction of Materials Select i.e., Materials Select and IShares Consumer go up and down completely randomly.
Pair Corralation between Materials Select and IShares Consumer
Considering the 90-day investment horizon Materials Select Sector is expected to under-perform the IShares Consumer. In addition to that, Materials Select is 1.45 times more volatile than iShares Consumer Staples. It trades about -0.02 of its total potential returns per unit of risk. iShares Consumer Staples is currently generating about 0.27 per unit of volatility. If you would invest 6,837 in iShares Consumer Staples on August 31, 2024 and sell it today you would earn a total of 231.00 from holding iShares Consumer Staples or generate 3.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Materials Select Sector vs. iShares Consumer Staples
Performance |
| Timeline |
| Materials Select Sector |
| iShares Consumer Staples |
Materials Select and IShares Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Materials Select and IShares Consumer
The main advantage of trading using opposite Materials Select and IShares Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Materials Select position performs unexpectedly, IShares Consumer 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 IShares Consumer will offset losses from the drop in IShares Consumer's long position.| Materials Select vs. Industrial Select Sector | Materials Select vs. Consumer Discretionary Select | Materials Select vs. Consumer Staples Select | Materials Select vs. Utilities Select Sector |
| IShares Consumer vs. Consumer Discretionary Select | IShares Consumer vs. Industrial Select Sector | IShares Consumer vs. Utilities Select Sector | IShares Consumer vs. Materials Select Sector |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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