Correlation Between Industrial Select and TrueShares Technology

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

By analyzing existing cross correlation between Industrial Select Sector and TrueShares Technology AI, you can compare the effects of market volatilities on Industrial Select and TrueShares Technology 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 Industrial Select with a short position of TrueShares Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Select and TrueShares Technology.

Diversification Opportunities for Industrial Select and TrueShares Technology

0.63

Correlation Coefficient

Industrial Select  TrueShares Technology

Poor diversification

The 3 months correlation between Industrial and TrueShares is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Select Sector and TrueShares Technology AI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrueShares Technology and Industrial Select 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 Industrial Select Sector are associated (or correlated) with TrueShares Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrueShares Technology has no effect on the direction of Industrial Select i.e., Industrial Select and TrueShares Technology go up and down completely randomly.

Pair Corralation between Industrial Select and TrueShares Technology

Considering the 90-day investment horizon Industrial Select Sector is expected to under-perform the TrueShares Technology. But the etf apears to be less risky and, when comparing its historical volatility, Industrial Select Sector is 1.83 times less risky than TrueShares Technology. The etf trades about -0.08 of its potential returns per unit of risk. The TrueShares Technology AI is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  3,909  in TrueShares Technology AI on October 15, 2024 and sell it today you would earn a total of  11.00  from holding TrueShares Technology AI or generate 0.28% return on investment over 90 days.

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

Industrial Select Sector  vs.  TrueShares Technology AI

Industrial Select Sector

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industrial Select Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Industrial Select is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

TrueShares Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TrueShares Technology AI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, TrueShares Technology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Industrial Select and TrueShares Technology

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

The idea behind Industrial Select Sector and TrueShares Technology AI 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.