Correlation Between Industrial Select and Consumer Staples
Can any of the company-specific risk be diversified away by investing in both Industrial Select and Consumer Staples 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 Consumer Staples 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 Consumer Staples Select, you can compare the effects of market volatilities on Industrial Select and Consumer Staples 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 Consumer Staples. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Select and Consumer Staples.
Diversification Opportunities for Industrial Select and Consumer Staples
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Industrial and Consumer is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Select Sector and Consumer Staples Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Staples Select 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 Consumer Staples. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Staples Select has no effect on the direction of Industrial Select i.e., Industrial Select and Consumer Staples go up and down completely randomly.
Pair Corralation between Industrial Select and Consumer Staples
Considering the 90-day investment horizon Industrial Select Sector is expected to generate 1.34 times more return on investment than Consumer Staples. However, Industrial Select is 1.34 times more volatile than Consumer Staples Select. It trades about 0.09 of its potential returns per unit of risk. Consumer Staples Select is currently generating about 0.04 per unit of risk. If you would invest 9,628 in Industrial Select Sector on August 27, 2024 and sell it today you would earn a total of 4,637 from holding Industrial Select Sector or generate 48.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Industrial Select Sector vs. Consumer Staples Select
Performance |
| Timeline |
| Industrial Select Sector |
| Consumer Staples Select |
Industrial Select and Consumer Staples Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Industrial Select and Consumer Staples
The main advantage of trading using opposite Industrial Select and Consumer Staples positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Industrial Select position performs unexpectedly, Consumer Staples 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 Staples will offset losses from the drop in Consumer Staples' long position.| Industrial Select vs. Gabelli ETFs Trust | Industrial Select vs. First Trust Exchange Traded | Industrial Select vs. Northern Lights | Industrial Select vs. First Trust Exchange Traded |
| Consumer Staples vs. Consumer Discretionary Select | Consumer Staples vs. Industrial Select Sector | Consumer Staples vs. Utilities Select Sector | Consumer Staples 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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