Correlation Between Real Estate and Consumer Staples
Can any of the company-specific risk be diversified away by investing in both Real Estate 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 Real Estate and Consumer Staples into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Real Estate and Consumer Staples Select, you can compare the effects of market volatilities on Real Estate 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 Real Estate with a short position of Consumer Staples. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Estate and Consumer Staples.
Diversification Opportunities for Real Estate and Consumer Staples
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Real and Consumer is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding The Real Estate 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 Real Estate 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 The Real Estate 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 Real Estate i.e., Real Estate and Consumer Staples go up and down completely randomly.
Pair Corralation between Real Estate and Consumer Staples
Given the investment horizon of 90 days The Real Estate is expected to generate 1.67 times more return on investment than Consumer Staples. However, Real Estate is 1.67 times more volatile than Consumer Staples Select. It trades about 0.06 of its potential returns per unit of risk. Consumer Staples Select is currently generating about 0.06 per unit of risk. 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 |
The Real Estate vs. Consumer Staples Select
Performance |
| Timeline |
| Real Estate |
| Consumer Staples Select |
Real Estate and Consumer Staples Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Real Estate and Consumer Staples
The main advantage of trading using opposite Real Estate and Consumer Staples positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Estate 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.The idea behind The Real Estate and Consumer Staples Select pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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