Correlation Between Consumer Discretionary and IShares Evolved
Can any of the company-specific risk be diversified away by investing in both Consumer Discretionary and IShares Evolved 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 Discretionary and IShares Evolved into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumer Discretionary Select and iShares Evolved Discretionary, you can compare the effects of market volatilities on Consumer Discretionary and IShares Evolved 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 Discretionary with a short position of IShares Evolved. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Discretionary and IShares Evolved.
Diversification Opportunities for Consumer Discretionary and IShares Evolved
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Consumer and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and iShares Evolved Discretionary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Evolved Disc and Consumer Discretionary 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 Discretionary Select are associated (or correlated) with IShares Evolved. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Evolved Disc has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and IShares Evolved go up and down completely randomly.
Pair Corralation between Consumer Discretionary and IShares Evolved
Considering the 90-day investment horizon Consumer Discretionary Select is expected to generate 1.72 times more return on investment than IShares Evolved. However, Consumer Discretionary is 1.72 times more volatile than iShares Evolved Discretionary. It trades about 0.36 of its potential returns per unit of risk. iShares Evolved Discretionary is currently generating about 0.51 per unit of risk. If you would invest 19,995 in Consumer Discretionary Select on August 31, 2024 and sell it today you would earn a total of 2,009 from holding Consumer Discretionary Select or generate 10.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Discretionary Select vs. iShares Evolved Discretionary
Performance |
| Timeline |
| Consumer Discretionary |
| iShares Evolved Disc |
Consumer Discretionary and IShares Evolved Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Discretionary and IShares Evolved
The main advantage of trading using opposite Consumer Discretionary and IShares Evolved positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Discretionary position performs unexpectedly, IShares Evolved 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 IShares Evolved will offset losses from the drop in IShares Evolved's long position.| Consumer Discretionary vs. Consumer Staples Select | Consumer Discretionary vs. Industrial Select Sector | Consumer Discretionary vs. Materials Select Sector | Consumer Discretionary vs. Health Care Select |
| IShares Evolved vs. iShares Evolved Technology | IShares Evolved vs. iShares Global Consumer | IShares Evolved vs. iShares ESG Aware | IShares Evolved vs. iShares Currency Hedged |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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