Correlation Between Consumer Services and Rising Us

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

By analyzing existing cross correlation between Consumer Services Ultrasector and Rising Dollar Profund, you can compare the effects of market volatilities on Consumer Services and Rising Us 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 Services with a short position of Rising Us. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Services and Rising Us.

Diversification Opportunities for Consumer Services and Rising Us

0.88

Correlation Coefficient

Consumer Services  Rising Us

Very poor diversification

The 3 months correlation between Consumer and Rising is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Services Ultrasector and Rising Dollar Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rising Dollar Profund and Consumer Services 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 Services Ultrasector are associated (or correlated) with Rising Us. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rising Dollar Profund has no effect on the direction of Consumer Services i.e., Consumer Services and Rising Us go up and down completely randomly.

Pair Corralation between Consumer Services and Rising Us

Assuming the 90 days horizon Consumer Services Ultrasector is expected to under-perform the Rising Us. In addition to that, Consumer Services is 4.6 times more volatile than Rising Dollar Profund. It trades about -0.16 of its total potential returns per unit of risk. Rising Dollar Profund is currently generating about -0.1 per unit of volatility. If you would invest  3,121  in Rising Dollar Profund on December 30, 2024 and sell it today you would lose (93.00) from holding Rising Dollar Profund or give up 2.98% of portfolio value over 90 days.

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

Consumer Services Ultrasector  vs.  Rising Dollar Profund

Consumer Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Consumer Services Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Rising Dollar Profund

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Consumer Services and Rising Us

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

The idea behind Consumer Services Ultrasector and Rising Dollar Profund 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.