Correlation Between Consumer Discretionary and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Consumer Discretionary and Invesco SP 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 Invesco SP 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 Invesco SP SmallCap, you can compare the effects of market volatilities on Consumer Discretionary and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Discretionary and Invesco SP.
Diversification Opportunities for Consumer Discretionary and Invesco SP
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Consumer and Invesco is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and Invesco SP go up and down completely randomly.
Pair Corralation between Consumer Discretionary and Invesco SP
Considering the 90-day investment horizon Consumer Discretionary Select is expected to generate 1.1 times more return on investment than Invesco SP. However, Consumer Discretionary is 1.1 times more volatile than Invesco SP SmallCap. It trades about 0.32 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about 0.3 per unit of risk. If you would invest 20,018 in Consumer Discretionary Select on August 25, 2024 and sell it today you would earn a total of 1,792 from holding Consumer Discretionary Select or generate 8.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Consumer Discretionary Select vs. Invesco SP SmallCap
Performance |
| Timeline |
| Consumer Discretionary |
| Invesco SP SmallCap |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Consumer Discretionary and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Discretionary and Invesco SP
The main advantage of trading using opposite Consumer Discretionary and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Discretionary position performs unexpectedly, Invesco SP 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 Invesco SP will offset losses from the drop in Invesco SP'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 |
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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