Correlation Between Utilities Fund and Consumer Discretionary

Can any of the company-specific risk be diversified away by investing in both Utilities Fund and Consumer Discretionary 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 Utilities Fund and Consumer Discretionary into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Utilities Fund Investor and Consumer Discretionary Portfolio, you can compare the effects of market volatilities on Utilities Fund and Consumer Discretionary 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 Utilities Fund with a short position of Consumer Discretionary. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utilities Fund and Consumer Discretionary.

Diversification Opportunities for Utilities Fund and Consumer Discretionary

-0.39

Correlation Coefficient

Utilities Fund  Consumer Discretionary

Very good diversification

The 3 months correlation between Utilities and Consumer is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Fund Investor and Consumer Discretionary Portfol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Discretionary and Utilities Fund 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 Utilities Fund Investor are associated (or correlated) with Consumer Discretionary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Discretionary has no effect on the direction of Utilities Fund i.e., Utilities Fund and Consumer Discretionary go up and down completely randomly.

Pair Corralation between Utilities Fund and Consumer Discretionary

Assuming the 90 days horizon Utilities Fund Investor is expected to under-perform the Consumer Discretionary. But the mutual fund apears to be less risky and, when comparing its historical volatility, Utilities Fund Investor is 1.37 times less risky than Consumer Discretionary. The mutual fund trades about -0.08 of its potential returns per unit of risk. The Consumer Discretionary Portfolio is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6,353  in Consumer Discretionary Portfolio on October 5, 2024 and sell it today you would earn a total of  459.00  from holding Consumer Discretionary Portfolio or generate 7.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Utilities Fund Investor  vs.  Consumer Discretionary Portfol

Utilities Fund Investor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utilities Fund Investor has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Utilities Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Consumer Discretionary

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Discretionary Portfolio are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Consumer Discretionary may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Utilities Fund and Consumer Discretionary

The main advantage of trading using opposite Utilities Fund and Consumer Discretionary positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Utilities Fund position performs unexpectedly, Consumer Discretionary 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 Consumer Discretionary will offset losses from the drop in Consumer Discretionary's long position.

The idea behind Utilities Fund Investor and Consumer Discretionary Portfolio pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.