Correlation Between IShares Trust and US Bancorp
Can any of the company-specific risk be diversified away by investing in both IShares Trust and US Bancorp 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 Trust and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and US Bancorp, you can compare the effects of market volatilities on IShares Trust and US Bancorp 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 Trust with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and US Bancorp.
Diversification Opportunities for IShares Trust and US Bancorp
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between IShares and USB is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and IShares Trust 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 Trust are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of IShares Trust i.e., IShares Trust and US Bancorp go up and down completely randomly.
Pair Corralation between IShares Trust and US Bancorp
Assuming the 90 days trading horizon IShares Trust is expected to generate 1.17 times less return on investment than US Bancorp. But when comparing it to its historical volatility, iShares Trust is 1.59 times less risky than US Bancorp. It trades about 0.14 of its potential returns per unit of risk. US Bancorp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 70,997 in US Bancorp on August 29, 2024 and sell it today you would earn a total of 30,553 from holding US Bancorp or generate 43.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 81.55% |
| Values | Daily Returns |
iShares Trust vs. US Bancorp
Performance |
| Timeline |
| iShares Trust |
| US Bancorp |
IShares Trust and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and US Bancorp
The main advantage of trading using opposite IShares Trust and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.| IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust |
| US Bancorp vs. McEwen Mining | US Bancorp vs. Grupo Sports World | US Bancorp vs. Prudential Financial | US Bancorp vs. Samsung Electronics Co |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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