Correlation Between Select Sector and CMR SAB
Can any of the company-specific risk be diversified away by investing in both Select Sector and CMR SAB 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 Select Sector and CMR SAB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Select Sector and CMR SAB de, you can compare the effects of market volatilities on Select Sector and CMR SAB 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 Select Sector with a short position of CMR SAB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Select Sector and CMR SAB.
Diversification Opportunities for Select Sector and CMR SAB
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Select and CMR is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding The Select Sector and CMR SAB de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMR SAB de and Select Sector 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 Select Sector are associated (or correlated) with CMR SAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMR SAB de has no effect on the direction of Select Sector i.e., Select Sector and CMR SAB go up and down completely randomly.
Pair Corralation between Select Sector and CMR SAB
Assuming the 90 days trading horizon The Select Sector is expected to generate 0.35 times more return on investment than CMR SAB. However, The Select Sector is 2.84 times less risky than CMR SAB. It trades about 0.14 of its potential returns per unit of risk. CMR SAB de is currently generating about -0.18 per unit of risk. If you would invest 159,394 in The Select Sector on August 25, 2024 and sell it today you would earn a total of 8,082 from holding The Select Sector or generate 5.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Select Sector vs. CMR SAB de
Performance |
| Timeline |
| Select Sector |
| CMR SAB de |
Select Sector and CMR SAB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Select Sector and CMR SAB
The main advantage of trading using opposite Select Sector and CMR SAB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Select Sector position performs unexpectedly, CMR SAB 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 CMR SAB will offset losses from the drop in CMR SAB's long position.| Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard Index Funds | Select Sector vs. Vanguard STAR Funds | Select Sector vs. SPDR SP 500 |
| CMR SAB vs. United Airlines Holdings | CMR SAB vs. First Republic Bank | CMR SAB vs. Samsung Electronics Co | CMR SAB vs. Southwest Airlines |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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