Correlation Between Consumer Discretionary and Industrial Select
Can any of the company-specific risk be diversified away by investing in both Consumer Discretionary and Industrial Select 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 Industrial Select 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 Industrial Select Sector, you can compare the effects of market volatilities on Consumer Discretionary and Industrial Select 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 Industrial Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Discretionary and Industrial Select.
Diversification Opportunities for Consumer Discretionary and Industrial Select
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Consumer and Industrial is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and Industrial Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrial Select Sector 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 Industrial Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrial Select Sector has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and Industrial Select go up and down completely randomly.
Pair Corralation between Consumer Discretionary and Industrial Select
Considering the 90-day investment horizon Consumer Discretionary Select is expected to under-perform the Industrial Select. In addition to that, Consumer Discretionary is 1.11 times more volatile than Industrial Select Sector. It trades about -0.05 of its total potential returns per unit of risk. Industrial Select Sector is currently generating about -0.01 per unit of volatility. If you would invest 13,775 in Industrial Select Sector on November 18, 2024 and sell it today you would lose (20.00) from holding Industrial Select Sector or give up 0.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Discretionary Select vs. Industrial Select Sector
Performance |
| Timeline |
| Consumer Discretionary |
| Industrial Select Sector |
Consumer Discretionary and Industrial Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Discretionary and Industrial Select
The main advantage of trading using opposite Consumer Discretionary and Industrial Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Discretionary position performs unexpectedly, Industrial Select 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 Industrial Select will offset losses from the drop in Industrial Select'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 |
| Industrial Select vs. Materials Select Sector | Industrial Select vs. Consumer Discretionary Select | Industrial Select vs. Consumer Staples Select | Industrial Select 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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