Correlation Between Consumer Discretionary and Utilities Select
Can any of the company-specific risk be diversified away by investing in both Consumer Discretionary and Utilities 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 Utilities 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 Utilities Select Sector, you can compare the effects of market volatilities on Consumer Discretionary and Utilities 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 Utilities Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Discretionary and Utilities Select.
Diversification Opportunities for Consumer Discretionary and Utilities Select
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Consumer and Utilities is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and Utilities Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities 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 Utilities Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Select Sector has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and Utilities Select go up and down completely randomly.
Pair Corralation between Consumer Discretionary and Utilities Select
Considering the 90-day investment horizon Consumer Discretionary Select is expected to generate 0.71 times more return on investment than Utilities Select. However, Consumer Discretionary Select is 1.41 times less risky than Utilities Select. It trades about 0.17 of its potential returns per unit of risk. Utilities Select Sector is currently generating about 0.12 per unit of risk. If you would invest 22,301 in Consumer Discretionary Select on November 9, 2024 and sell it today you would earn a total of 707.00 from holding Consumer Discretionary Select or generate 3.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumer Discretionary Select vs. Utilities Select Sector
Performance |
| Timeline |
| Consumer Discretionary |
| Utilities Select Sector |
Consumer Discretionary and Utilities Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Discretionary and Utilities Select
The main advantage of trading using opposite Consumer Discretionary and Utilities Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Discretionary position performs unexpectedly, Utilities 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 Utilities Select will offset losses from the drop in Utilities 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 |
| Utilities Select vs. Consumer Staples Select | Utilities Select vs. Industrial Select Sector | Utilities Select vs. Materials Select Sector | Utilities 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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