Correlation Between Technology Select and Utilities Select
Can any of the company-specific risk be diversified away by investing in both Technology Select and Utilities Select 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 Technology Select and Utilities Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Technology Select Sector and Utilities Select Sector, you can compare the effects of market volatilities on Technology Select and Utilities Select 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 Technology Select with a short position of Utilities Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Technology Select and Utilities Select.
Diversification Opportunities for Technology Select and Utilities Select
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Technology and Utilities is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and Utilities Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Select Sector and Technology 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 Technology Select Sector are associated (or correlated) with Utilities Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Select Sector has no effect on the direction of Technology Select i.e., Technology Select and Utilities Select go up and down completely randomly.
Pair Corralation between Technology Select and Utilities Select
Considering the 90-day investment horizon Technology Select is expected to generate 1.16 times less return on investment than Utilities Select. In addition to that, Technology Select is 1.38 times more volatile than Utilities Select Sector. It trades about 0.08 of its total potential returns per unit of risk. Utilities Select Sector is currently generating about 0.12 per unit of volatility. If you would invest 6,076 in Utilities Select Sector on August 26, 2024 and sell it today you would earn a total of 2,069 from holding Utilities Select Sector or generate 34.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Technology Select Sector vs. Utilities Select Sector
Performance |
| Timeline |
| Technology Select Sector |
| Utilities Select Sector |
Technology Select and Utilities Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Technology Select and Utilities Select
The main advantage of trading using opposite Technology Select and Utilities Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Technology Select position performs unexpectedly, Utilities Select 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 Utilities Select will offset losses from the drop in Utilities Select's long position.| Technology Select vs. Invesco DWA Utilities | Technology Select vs. Invesco Dynamic Large | Technology Select vs. Invesco Dynamic Large | Technology Select vs. HUMANA INC |
| Utilities Select vs. Consumer Staples Select | Utilities Select vs. Industrial Select Sector | Utilities Select vs. Materials Select Sector | Utilities 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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