Correlation Between Automotive Portfolio and Consumer Discretionary

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

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

Diversification Opportunities for Automotive Portfolio and Consumer Discretionary

0.93

Correlation Coefficient

Automotive Portfolio  Consumer Discretionary

Almost no diversification

The 3 months correlation between Automotive and CONSUMER is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Automotive Portfolio Automotiv and Consumer Discretionary Portfol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Discretionary and Automotive Portfolio 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 Automotive Portfolio Automotive are associated (or correlated) with Consumer Discretionary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Discretionary has no effect on the direction of Automotive Portfolio i.e., Automotive Portfolio and Consumer Discretionary go up and down completely randomly.

Pair Corralation between Automotive Portfolio and Consumer Discretionary

Assuming the 90 days horizon Automotive Portfolio is expected to generate 1.86 times less return on investment than Consumer Discretionary. In addition to that, Automotive Portfolio is 1.09 times more volatile than Consumer Discretionary Portfolio. It trades about 0.12 of its total potential returns per unit of risk. Consumer Discretionary Portfolio is currently generating about 0.24 per unit of volatility. If you would invest  6,065  in Consumer Discretionary Portfolio on September 3, 2024 and sell it today you would earn a total of  1,061  from holding Consumer Discretionary Portfolio or generate 17.49% return on investment over 90 days.

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

Automotive Portfolio Automotiv  vs.  Consumer Discretionary Portfol

Automotive Portfolio

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Automotive Portfolio Automotive are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Automotive Portfolio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Consumer Discretionary

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Discretionary Portfolio are ranked lower than 19 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Consumer Discretionary showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Automotive Portfolio and Consumer Discretionary

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

The idea behind Automotive Portfolio Automotive and Consumer Discretionary Portfolio 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 Commodity Directory module to find actively traded commodities issued by global exchanges.