Correlation Between Consumer Staples and Vanguard Consumer

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

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

Diversification Opportunities for Consumer Staples and Vanguard Consumer

0.59

Correlation Coefficient

Consumer Staples  Vanguard Consumer

Very weak diversification

The 3 months correlation between Consumer and Vanguard is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Staples Portfolio and Vanguard Sumer Staples in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Sumer Staples and Consumer Staples 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 Staples Portfolio are associated (or correlated) with Vanguard Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Sumer Staples has no effect on the direction of Consumer Staples i.e., Consumer Staples and Vanguard Consumer go up and down completely randomly.

Pair Corralation between Consumer Staples and Vanguard Consumer

Assuming the 90 days horizon Consumer Staples Portfolio is expected to under-perform the Vanguard Consumer. In addition to that, Consumer Staples is 1.16 times more volatile than Vanguard Sumer Staples. It trades about -0.01 of its total potential returns per unit of risk. Vanguard Sumer Staples is currently generating about 0.04 per unit of volatility. If you would invest  9,117  in Vanguard Sumer Staples on October 9, 2024 and sell it today you would earn a total of  1,186  from holding Vanguard Sumer Staples or generate 13.01% return on investment over 90 days.

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

Consumer Staples Portfolio  vs.  Vanguard Sumer Staples

Consumer Staples Por

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consumer Staples Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest conflicting performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Vanguard Sumer Staples

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Sumer Staples has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Consumer 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 Staples and Vanguard Consumer

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

The idea behind Consumer Staples Portfolio and Vanguard Sumer Staples 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.