Correlation Between Consumer Discretionary and SPDR SP

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

Diversification Opportunities for Consumer Discretionary and SPDR SP

0.62

Correlation Coefficient

Consumer Discretionary  SPDR SP

Poor diversification

The 3 months correlation between Consumer and SPDR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Discretionary Select and SPDR SP Retail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP Retail 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP Retail has no effect on the direction of Consumer Discretionary i.e., Consumer Discretionary and SPDR SP go up and down completely randomly.

Pair Corralation between Consumer Discretionary and SPDR SP

Considering the 90-day investment horizon Consumer Discretionary Select is expected to generate 1.17 times more return on investment than SPDR SP. However, Consumer Discretionary is 1.17 times more volatile than SPDR SP Retail. It trades about -0.02 of its potential returns per unit of risk. SPDR SP Retail is currently generating about -0.13 per unit of risk. If you would invest  22,188  in Consumer Discretionary Select on November 28, 2024 and sell it today you would lose (431.00) from holding Consumer Discretionary Select or give up 1.94% of portfolio value over 90 days.

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

Consumer Discretionary Select  vs.  SPDR SP Retail

Consumer Discretionary

Risk-Adjusted Performance

Very Weak

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

SPDR SP Retail

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR SP Retail has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Pair Trading with Consumer Discretionary and SPDR SP

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

The idea behind Consumer Discretionary Select and SPDR SP Retail 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.