Correlation Between Consumer Discretionary and Themes European

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

Diversification Opportunities for Consumer Discretionary and Themes European

-0.64

Correlation Coefficient

Consumer Discretionary  Themes European

Excellent diversification

The 3 months correlation between Consumer and Themes is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and Themes European Luxury in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Themes European Luxury 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 Themes European. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Themes European Luxury has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and Themes European go up and down completely randomly.

Pair Corralation between Consumer Discretionary and Themes European

Considering the 90-day investment horizon Consumer Discretionary Select is expected to generate 0.58 times more return on investment than Themes European. However, Consumer Discretionary Select is 1.72 times less risky than Themes European. It trades about 0.29 of its potential returns per unit of risk. Themes European Luxury is currently generating about -0.12 per unit of risk. If you would invest  18,417  in Consumer Discretionary Select on September 3, 2024 and sell it today you would earn a total of  4,007  from holding Consumer Discretionary Select or generate 21.76% return on investment over 90 days.

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

Consumer Discretionary Select  vs.  Themes European Luxury

Consumer Discretionary

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Discretionary Select are ranked lower than 22 (%) 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.

Themes European Luxury

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Themes European Luxury has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Pair Trading with Consumer Discretionary and Themes European

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

The idea behind Consumer Discretionary Select and Themes European Luxury 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.