Correlation Between Consumer Discretionary and Real Estate
Can any of the company-specific risk be diversified away by investing in both Consumer Discretionary and Real Estate 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 Real Estate 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 The Real Estate, you can compare the effects of market volatilities on Consumer Discretionary and Real Estate 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 Real Estate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Discretionary and Real Estate.
Diversification Opportunities for Consumer Discretionary and Real Estate
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Consumer and Real is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and The Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Real Estate 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 Real Estate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Real Estate has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and Real Estate go up and down completely randomly.
Pair Corralation between Consumer Discretionary and Real Estate
Considering the 90-day investment horizon Consumer Discretionary Select is expected to generate 1.06 times more return on investment than Real Estate. However, Consumer Discretionary is 1.06 times more volatile than The Real Estate. It trades about 0.21 of its potential returns per unit of risk. The Real Estate is currently generating about -0.02 per unit of risk. If you would invest 19,971 in Consumer Discretionary Select on November 1, 2024 and sell it today you would earn a total of 3,349 from holding Consumer Discretionary Select or generate 16.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Discretionary Select vs. The Real Estate
Performance |
| Timeline |
| Consumer Discretionary |
| Real Estate |
Consumer Discretionary and Real Estate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Discretionary and Real Estate
The main advantage of trading using opposite Consumer Discretionary and Real Estate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Discretionary position performs unexpectedly, Real Estate 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 Real Estate will offset losses from the drop in Real Estate'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 |
| Real Estate vs. Communication Services Select | Real Estate vs. Materials Select Sector | Real Estate vs. Industrial Select Sector | Real Estate vs. Consumer Discretionary 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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