Correlation Between US Global and Consumer Discretionary

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

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

Diversification Opportunities for US Global and Consumer Discretionary

-0.51

Correlation Coefficient

US Global  Consumer Discretionary

Excellent diversification

The 3 months correlation between SEA and Consumer is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding US Global Sea and Consumer Discretionary Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Discretionary and US Global 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 US Global Sea 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 US Global i.e., US Global and Consumer Discretionary go up and down completely randomly.

Pair Corralation between US Global and Consumer Discretionary

Considering the 90-day investment horizon US Global Sea is expected to generate 0.88 times more return on investment than Consumer Discretionary. However, US Global Sea is 1.14 times less risky than Consumer Discretionary. It trades about 0.29 of its potential returns per unit of risk. Consumer Discretionary Select is currently generating about -0.06 per unit of risk. If you would invest  1,506  in US Global Sea on January 31, 2024 and sell it today you would earn a total of  88.00  from holding US Global Sea or generate 5.84% return on investment over 90 days.

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

US Global Sea  vs.  Consumer Discretionary Select

US Global Sea

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in US Global Sea are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, US Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Consumer Discretionary

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Consumer Discretionary Select are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, Consumer Discretionary is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with US Global and Consumer Discretionary

The main advantage of trading using opposite US Global and Consumer Discretionary positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Global 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 US Global Sea and Consumer Discretionary Select 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.