Correlation Between Consumer Discretionary and VanEck Biotech
Can any of the company-specific risk be diversified away by investing in both Consumer Discretionary and VanEck Biotech 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 VanEck Biotech 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 VanEck Biotech ETF, you can compare the effects of market volatilities on Consumer Discretionary and VanEck Biotech 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 VanEck Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Discretionary and VanEck Biotech.
Diversification Opportunities for Consumer Discretionary and VanEck Biotech
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Consumer and VanEck is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and VanEck Biotech ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Biotech ETF 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 VanEck Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Biotech ETF has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and VanEck Biotech go up and down completely randomly.
Pair Corralation between Consumer Discretionary and VanEck Biotech
Considering the 90-day investment horizon Consumer Discretionary Select is expected to generate 1.21 times more return on investment than VanEck Biotech. However, Consumer Discretionary is 1.21 times more volatile than VanEck Biotech ETF. It trades about 0.01 of its potential returns per unit of risk. VanEck Biotech ETF is currently generating about 0.01 per unit of risk. If you would invest 16,856 in Consumer Discretionary Select on January 18, 2024 and sell it today you would earn a total of 377.00 from holding Consumer Discretionary Select or generate 2.24% 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. VanEck Biotech ETF
Performance |
| Timeline |
| Consumer Discretionary |
| VanEck Biotech ETF |
Consumer Discretionary and VanEck Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumer Discretionary and VanEck Biotech
The main advantage of trading using opposite Consumer Discretionary and VanEck Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumer Discretionary position performs unexpectedly, VanEck Biotech 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 VanEck Biotech will offset losses from the drop in VanEck Biotech'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 |
| VanEck Biotech vs. Consumer Staples Select | VanEck Biotech vs. Industrial Select Sector | VanEck Biotech vs. Consumer Discretionary Select | VanEck Biotech vs. Utilities Select Sector |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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