Correlation Between Consumer Services and Ultrashort Small

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

By analyzing existing cross correlation between Consumer Services Ultrasector and Ultrashort Small Cap Profund, you can compare the effects of market volatilities on Consumer Services and Ultrashort Small 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 Services with a short position of Ultrashort Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Services and Ultrashort Small.

Diversification Opportunities for Consumer Services and Ultrashort Small

-0.82

Correlation Coefficient

Consumer Services  Ultrashort Small

Pay attention - limited upside

The 3 months correlation between Consumer and Ultrashort is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Services Ultrasector and Ultrashort Small Cap Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Small Cap and Consumer Services 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 Services Ultrasector are associated (or correlated) with Ultrashort Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Small Cap has no effect on the direction of Consumer Services i.e., Consumer Services and Ultrashort Small go up and down completely randomly.

Pair Corralation between Consumer Services and Ultrashort Small

Assuming the 90 days horizon Consumer Services Ultrasector is expected to generate 0.69 times more return on investment than Ultrashort Small. However, Consumer Services Ultrasector is 1.46 times less risky than Ultrashort Small. It trades about 0.09 of its potential returns per unit of risk. Ultrashort Small Cap Profund is currently generating about -0.03 per unit of risk. If you would invest  3,800  in Consumer Services Ultrasector on September 19, 2024 and sell it today you would earn a total of  3,862  from holding Consumer Services Ultrasector or generate 101.63% return on investment over 90 days.

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

Consumer Services Ultrasector  vs.  Ultrashort Small Cap Profund

Consumer Services

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Services Ultrasector are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Consumer Services showed solid returns over the last few months and may actually be approaching a breakup point.

Ultrashort Small Cap

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort Small Cap Profund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Ultrashort Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Consumer Services and Ultrashort Small

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

The idea behind Consumer Services Ultrasector and Ultrashort Small Cap Profund 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.