Correlation Between Main Thematic and Main Sector
Can any of the company-specific risk be diversified away by investing in both Main Thematic and Main Sector 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 Main Thematic and Main Sector into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Main Thematic Innovation and Main Sector Rotation, you can compare the effects of market volatilities on Main Thematic and Main Sector 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 Main Thematic with a short position of Main Sector. Check out your portfolio center. Please also check ongoing floating volatility patterns of Main Thematic and Main Sector.
Diversification Opportunities for Main Thematic and Main Sector
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Main and Main is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Main Thematic Innovation and Main Sector Rotation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Sector Rotation and Main Thematic 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 Main Thematic Innovation are associated (or correlated) with Main Sector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Sector Rotation has no effect on the direction of Main Thematic i.e., Main Thematic and Main Sector go up and down completely randomly.
Pair Corralation between Main Thematic and Main Sector
Given the investment horizon of 90 days Main Thematic Innovation is expected to under-perform the Main Sector. In addition to that, Main Thematic is 2.0 times more volatile than Main Sector Rotation. It trades about -0.06 of its total potential returns per unit of risk. Main Sector Rotation is currently generating about -0.07 per unit of volatility. If you would invest 5,655 in Main Sector Rotation on December 26, 2024 and sell it today you would lose (313.00) from holding Main Sector Rotation or give up 5.53% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Main Thematic Innovation vs. Main Sector Rotation
Performance |
Timeline |
Main Thematic Innovation |
Main Sector Rotation |
Main Thematic and Main Sector Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Main Thematic and Main Sector
The main advantage of trading using opposite Main Thematic and Main Sector positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Thematic position performs unexpectedly, Main Sector 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 Main Sector will offset losses from the drop in Main Sector's long position.Main Thematic vs. Main Sector Rotation | Main Thematic vs. Global X Thematic | Main Thematic vs. Franklin Exponential Data | Main Thematic vs. Goldman Sachs Innovate |
Main Sector vs. Main Thematic Innovation | Main Sector vs. SPDR SSGA Sector | Main Sector vs. iShares MSCI USA | Main Sector vs. SPDR MSCI USA |
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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