Correlation Between Industrial Select and US Global
Can any of the company-specific risk be diversified away by investing in both Industrial Select and US 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 US 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 US Global Sea, you can compare the effects of market volatilities on Industrial Select and US 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 US Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Select and US Global.
Diversification Opportunities for Industrial Select and US Global
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Industrial and SEA is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Select Sector and US Global Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Global Sea 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 US Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Global Sea has no effect on the direction of Industrial Select i.e., Industrial Select and US Global go up and down completely randomly.
Pair Corralation between Industrial Select and US Global
Considering the 90-day investment horizon Industrial Select Sector is expected to generate 0.78 times more return on investment than US Global. However, Industrial Select Sector is 1.29 times less risky than US Global. It trades about 0.09 of its potential returns per unit of risk. US Global Sea is currently generating about 0.05 per unit of risk. If you would invest 9,758 in Industrial Select Sector on September 2, 2024 and sell it today you would earn a total of 4,641 from holding Industrial Select Sector or generate 47.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Select Sector vs. US Global Sea
Performance |
| Timeline |
| Industrial Select Sector |
| US Global Sea |
Industrial Select and US Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Select and US Global
The main advantage of trading using opposite Industrial Select and US Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Select position performs unexpectedly, US 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 US Global will offset losses from the drop in US 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 |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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