Correlation Between Consumer Goods and SMART Earnings

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

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

Diversification Opportunities for Consumer Goods and SMART Earnings

-0.64

Correlation Coefficient

Consumer Goods  SMART Earnings

Excellent diversification

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

Pair Corralation between Consumer Goods and SMART Earnings

Assuming the 90 days horizon Consumer Goods Ultrasector is expected to under-perform the SMART Earnings. But the mutual fund apears to be less risky and, when comparing its historical volatility, Consumer Goods Ultrasector is 2.09 times less risky than SMART Earnings. The mutual fund trades about -0.2 of its potential returns per unit of risk. The SMART Earnings Growth is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  2,499  in SMART Earnings Growth on August 19, 2025 and sell it today you would lose (123.00) from holding SMART Earnings Growth or give up 4.92% of portfolio value over 90 days.

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

Consumer Goods Ultrasector  vs.  SMART Earnings Growth

Consumer Goods Ultra

Risk-Adjusted Performance

Weakest

Over the last 90 days Consumer Goods Ultrasector has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

SMART Earnings Growth

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in SMART Earnings Growth are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SMART Earnings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Consumer Goods and SMART Earnings

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

The idea behind Consumer Goods Ultrasector and SMART Earnings Growth 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.