Correlation Between Industrial Select and SonicShares Global
Can any of the company-specific risk be diversified away by investing in both Industrial Select and SonicShares Global 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 Industrial Select and SonicShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Industrial Select Sector and SonicShares Global Shipping, you can compare the effects of market volatilities on Industrial Select and SonicShares Global 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 Industrial Select with a short position of SonicShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Select and SonicShares Global.
Diversification Opportunities for Industrial Select and SonicShares Global
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Industrial and SonicShares is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Select Sector and SonicShares Global Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SonicShares Global and Industrial 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 Industrial Select Sector are associated (or correlated) with SonicShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SonicShares Global has no effect on the direction of Industrial Select i.e., Industrial Select and SonicShares Global go up and down completely randomly.
Pair Corralation between Industrial Select and SonicShares Global
Considering the 90-day investment horizon Industrial Select Sector is expected to generate 0.9 times more return on investment than SonicShares Global. However, Industrial Select Sector is 1.11 times less risky than SonicShares Global. It trades about 0.31 of its potential returns per unit of risk. SonicShares Global Shipping is currently generating about -0.17 per unit of risk. If you would invest 13,383 in Industrial Select Sector on September 1, 2024 and sell it today you would earn a total of 1,016 from holding Industrial Select Sector or generate 7.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Industrial Select Sector vs. SonicShares Global Shipping
Performance |
| Timeline |
| Industrial Select Sector |
| SonicShares Global |
Industrial Select and SonicShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Select and SonicShares Global
The main advantage of trading using opposite Industrial Select and SonicShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Select position performs unexpectedly, SonicShares Global 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 SonicShares Global will offset losses from the drop in SonicShares Global's long position.| Industrial Select vs. Materials Select Sector | Industrial Select vs. Consumer Discretionary Select | Industrial Select vs. Consumer Staples Select | Industrial Select vs. Health Care Select |
| SonicShares Global vs. Industrial Select Sector | SonicShares Global vs. Driven Brands Holdings | SonicShares Global vs. iShares Industrials ETF | SonicShares Global vs. iShares Transportation Average |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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