Correlation Between ETRACS Quarterly and IShares Financials
Can any of the company-specific risk be diversified away by investing in both ETRACS Quarterly and IShares Financials 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 ETRACS Quarterly and IShares Financials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS Quarterly Pay and iShares Financials ETF, you can compare the effects of market volatilities on ETRACS Quarterly and IShares Financials 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 ETRACS Quarterly with a short position of IShares Financials. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS Quarterly and IShares Financials.
Diversification Opportunities for ETRACS Quarterly and IShares Financials
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ETRACS and IShares is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS Quarterly Pay and iShares Financials ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financials ETF and ETRACS Quarterly 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 ETRACS Quarterly Pay are associated (or correlated) with IShares Financials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financials ETF has no effect on the direction of ETRACS Quarterly i.e., ETRACS Quarterly and IShares Financials go up and down completely randomly.
Pair Corralation between ETRACS Quarterly and IShares Financials
Given the investment horizon of 90 days ETRACS Quarterly is expected to generate 2.93 times less return on investment than IShares Financials. But when comparing it to its historical volatility, ETRACS Quarterly Pay is 1.15 times less risky than IShares Financials. It trades about 0.09 of its potential returns per unit of risk. iShares Financials ETF is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 10,390 in iShares Financials ETF on August 30, 2024 and sell it today you would earn a total of 1,507 from holding iShares Financials ETF or generate 14.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETRACS Quarterly Pay vs. iShares Financials ETF
Performance |
| Timeline |
| ETRACS Quarterly Pay |
| iShares Financials ETF |
ETRACS Quarterly and IShares Financials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS Quarterly and IShares Financials
The main advantage of trading using opposite ETRACS Quarterly and IShares Financials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS Quarterly position performs unexpectedly, IShares Financials 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 IShares Financials will offset losses from the drop in IShares Financials' long position.| ETRACS Quarterly vs. ABIVAX Socit Anonyme | ETRACS Quarterly vs. Morningstar Unconstrained Allocation | ETRACS Quarterly vs. SPACE | ETRACS Quarterly vs. Knife River |
| IShares Financials vs. iShares Financial Services | IShares Financials vs. iShares Industrials ETF | IShares Financials vs. iShares Consumer Discretionary | IShares Financials vs. iShares Healthcare ETF |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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