Correlation Between Consumer Staples and Real Estate
Can any of the company-specific risk be diversified away by investing in both Consumer Staples and Real Estate 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 Real Estate 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 The Real Estate, you can compare the effects of market volatilities on Consumer Staples and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Staples and Real Estate.
Diversification Opportunities for Consumer Staples and Real Estate
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Consumer and Real is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Staples Select and The Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate has no effect on the direction of Consumer Staples i.e., Consumer Staples and Real Estate go up and down completely randomly.
Pair Corralation between Consumer Staples and Real Estate
Considering the 90-day investment horizon Consumer Staples is expected to generate 1.76 times less return on investment than Real Estate. But when comparing it to its historical volatility, Consumer Staples Select is 1.67 times less risky than Real Estate. It trades about 0.06 of its potential returns per unit of risk. The Real Estate is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,638 in The Real Estate on August 26, 2024 and sell it today you would earn a total of 771.00 from holding The Real Estate or generate 21.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Staples Select vs. The Real Estate
Performance |
| Timeline |
| Consumer Staples Select |
| Real Estate |
Consumer Staples and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Staples and Real Estate
The main advantage of trading using opposite Consumer Staples and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Staples position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate's long position.| Consumer Staples vs. Vanguard Consumer Discretionary | Consumer Staples vs. Vanguard Utilities Index | Consumer Staples vs. Vanguard Industrials Index | Consumer Staples vs. Vanguard Materials Index |
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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