Correlation Between IShares Fundamental and Total Energy
Can any of the company-specific risk be diversified away by investing in both IShares Fundamental and Total Energy 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 IShares Fundamental and Total Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Fundamental Hedged and Total Energy Services, you can compare the effects of market volatilities on IShares Fundamental and Total Energy 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 IShares Fundamental with a short position of Total Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Fundamental and Total Energy.
Diversification Opportunities for IShares Fundamental and Total Energy
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and Total is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Fundamental Hedged and Total Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Energy Services and IShares Fundamental 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 iShares Fundamental Hedged are associated (or correlated) with Total Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Energy Services has no effect on the direction of IShares Fundamental i.e., IShares Fundamental and Total Energy go up and down completely randomly.
Pair Corralation between IShares Fundamental and Total Energy
Assuming the 90 days trading horizon IShares Fundamental is expected to generate 4.26 times less return on investment than Total Energy. But when comparing it to its historical volatility, iShares Fundamental Hedged is 1.85 times less risky than Total Energy. It trades about 0.24 of its potential returns per unit of risk. Total Energy Services is currently generating about 0.54 of returns per unit of risk over similar time horizon. If you would invest 980.00 in Total Energy Services on August 26, 2024 and sell it today you would earn a total of 200.00 from holding Total Energy Services or generate 20.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Fundamental Hedged vs. Total Energy Services
Performance |
| Timeline |
| iShares Fundamental |
| Total Energy Services |
IShares Fundamental and Total Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Fundamental and Total Energy
The main advantage of trading using opposite IShares Fundamental and Total Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Fundamental position performs unexpectedly, Total Energy 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 Total Energy will offset losses from the drop in Total Energy's long position.| IShares Fundamental vs. iShares Convertible Bond | IShares Fundamental vs. iShares SP Mid Cap | IShares Fundamental vs. iShares Edge MSCI | IShares Fundamental vs. iShares Flexible Monthly |
| Total Energy vs. PHX Energy Services | Total Energy vs. Pason Systems | Total Energy vs. CES Energy Solutions | Total Energy vs. Western Energy Services |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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