Correlation Between Industrial Select and VCLO

Can any of the company-specific risk be diversified away by investing in both Industrial Select and VCLO 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 VCLO 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 VCLO, you can compare the effects of market volatilities on Industrial Select and VCLO 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 VCLO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Industrial Select and VCLO.

Diversification Opportunities for Industrial Select and VCLO

0.0

Correlation Coefficient

Industrial Select  VCLO

Pay attention - limited upside

The 3 months correlation between Industrial and VCLO is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Industrial Select Sector and VCLO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VCLO 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 VCLO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VCLO has no effect on the direction of Industrial Select i.e., Industrial Select and VCLO go up and down completely randomly.

Pair Corralation between Industrial Select and VCLO

If you would invest  11,051  in Industrial Select Sector on October 2, 2024 and sell it today you would earn a total of  2,125  from holding Industrial Select Sector or generate 19.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.4%
Values	Daily Returns

Industrial Select Sector  vs.  VCLO

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.

VCLO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VCLO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, VCLO is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Industrial Select and VCLO

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

The idea behind Industrial Select Sector and VCLO 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.