Correlation Between Consumer Staples and Energy Select
Can any of the company-specific risk be diversified away by investing in both Consumer Staples and Energy 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 Consumer Staples and Energy Select 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 Energy Select Sector, you can compare the effects of market volatilities on Consumer Staples and Energy 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 Consumer Staples with a short position of Energy Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Staples and Energy Select.
Diversification Opportunities for Consumer Staples and Energy Select
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Consumer and Energy is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Staples Select and Energy Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Select Sector 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 Energy Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Select Sector has no effect on the direction of Consumer Staples i.e., Consumer Staples and Energy Select go up and down completely randomly.
Pair Corralation between Consumer Staples and Energy Select
Considering the 90-day investment horizon Consumer Staples is expected to generate 1.02 times less return on investment than Energy Select. But when comparing it to its historical volatility, Consumer Staples Select is 1.9 times less risky than Energy Select. It trades about 0.05 of its potential returns per unit of risk. Energy Select Sector is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7,811 in Energy Select Sector on November 19, 2024 and sell it today you would earn a total of 1,196 from holding Energy Select Sector or generate 15.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Staples Select vs. Energy Select Sector
Performance |
| Timeline |
| Consumer Staples Select |
| Energy Select Sector |
Consumer Staples and Energy Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Staples and Energy Select
The main advantage of trading using opposite Consumer Staples and Energy Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Staples position performs unexpectedly, Energy 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 Energy Select will offset losses from the drop in Energy Select'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 |
| Energy Select vs. Financial Select Sector | Energy Select vs. Health Care Select | Energy Select vs. Technology Select Sector | Energy Select vs. Utilities 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Other Complementary Tools
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |