Correlation Between Consumer Discretionary and ProShares Big

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

By analyzing existing cross correlation between Consumer Discretionary Select and ProShares Big Data, you can compare the effects of market volatilities on Consumer Discretionary and ProShares Big 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 Discretionary with a short position of ProShares Big. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Discretionary and ProShares Big.

Diversification Opportunities for Consumer Discretionary and ProShares Big

0.95

Correlation Coefficient

Consumer Discretionary  ProShares Big

Almost no diversification

The 3 months correlation between Consumer and ProShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and ProShares Big Data in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Big Data and Consumer Discretionary 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 Discretionary Select are associated (or correlated) with ProShares Big. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Big Data has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and ProShares Big go up and down completely randomly.

Pair Corralation between Consumer Discretionary and ProShares Big

Considering the 90-day investment horizon Consumer Discretionary Select is expected to generate 0.77 times more return on investment than ProShares Big. However, Consumer Discretionary Select is 1.3 times less risky than ProShares Big. It trades about 0.23 of its potential returns per unit of risk. ProShares Big Data is currently generating about 0.02 per unit of risk. If you would invest  21,500  in Consumer Discretionary Select on September 22, 2024 and sell it today you would earn a total of  1,391  from holding Consumer Discretionary Select or generate 6.47% return on investment over 90 days.

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

Consumer Discretionary Select  vs.  ProShares Big Data

Consumer Discretionary

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Discretionary Select are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Consumer Discretionary showed solid returns over the last few months and may actually be approaching a breakup point.

ProShares Big Data

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Big Data are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ProShares Big unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Consumer Discretionary and ProShares Big

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

The idea behind Consumer Discretionary Select and ProShares Big Data 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.