Correlation Between Select Sector and Accenture Plc

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

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

Diversification Opportunities for Select Sector and Accenture Plc

0.43

Correlation Coefficient

Select Sector  Accenture Plc

Very weak diversification

The 3 months correlation between Select and Accenture is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding The Select Sector and Accenture plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Accenture plc and Select Sector 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 The Select Sector are associated (or correlated) with Accenture Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Accenture plc has no effect on the direction of Select Sector i.e., Select Sector and Accenture Plc go up and down completely randomly.

Pair Corralation between Select Sector and Accenture Plc

Assuming the 90 days trading horizon The Select Sector is expected to under-perform the Accenture Plc. In addition to that, Select Sector is 1.31 times more volatile than Accenture plc. It trades about -0.02 of its total potential returns per unit of risk. Accenture plc is currently generating about 0.14 per unit of volatility. If you would invest  647,000  in Accenture plc on September 21, 2024 and sell it today you would earn a total of  74,300  from holding Accenture plc or generate 11.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.08%
Values	Daily Returns

The Select Sector  vs.  Accenture plc

Select Sector

Risk-Adjusted Performance

0 of 100

Weak

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

Accenture plc

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Accenture plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Accenture Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Select Sector and Accenture Plc

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

The idea behind The Select Sector and Accenture plc 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.