Correlation Between Consumer Staples and First Trust
Can any of the company-specific risk be diversified away by investing in both Consumer Staples and First Trust 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 Consumer Staples and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Staples Select and First Trust Nasdaq, you can compare the effects of market volatilities on Consumer Staples and First Trust 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 Consumer Staples with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Staples and First Trust.
Diversification Opportunities for Consumer Staples and First Trust
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Consumer and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Staples Select and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and Consumer Staples 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 Consumer Staples Select are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Nasdaq has no effect on the direction of Consumer Staples i.e., Consumer Staples and First Trust go up and down completely randomly.
Pair Corralation between Consumer Staples and First Trust
Considering the 90-day investment horizon Consumer Staples Select is expected to generate 0.92 times more return on investment than First Trust. However, Consumer Staples Select is 1.09 times less risky than First Trust. It trades about 0.2 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.01 per unit of risk. If you would invest 8,041 in Consumer Staples Select on August 30, 2024 and sell it today you would earn a total of 239.00 from holding Consumer Staples Select or generate 2.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Staples Select vs. First Trust Nasdaq
Performance |
| Timeline |
| Consumer Staples Select |
| First Trust Nasdaq |
Consumer Staples and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Staples and First Trust
The main advantage of trading using opposite Consumer Staples and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Staples position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Consumer Staples vs. Consumer Discretionary Select | Consumer Staples vs. Industrial Select Sector | Consumer Staples vs. Utilities Select Sector | Consumer Staples vs. Materials Select Sector |
| First Trust vs. Fidelity MSCI Utilities | First Trust vs. Fidelity MSCI Industrials | First Trust vs. Fidelity MSCI Materials | First Trust vs. Fidelity MSCI Consumer |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device |