Correlation Between IShares Insurance and IShares Financial
Can any of the company-specific risk be diversified away by investing in both IShares Insurance and IShares Financial 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 Insurance and IShares Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Insurance ETF and iShares Financial Services, you can compare the effects of market volatilities on IShares Insurance and IShares Financial 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 Insurance with a short position of IShares Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Insurance and IShares Financial.
Diversification Opportunities for IShares Insurance and IShares Financial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Insurance ETF and iShares Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financial and IShares Insurance 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 Insurance ETF are associated (or correlated) with IShares Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financial has no effect on the direction of IShares Insurance i.e., IShares Insurance and IShares Financial go up and down completely randomly.
Pair Corralation between IShares Insurance and IShares Financial
Considering the 90-day investment horizon IShares Insurance is expected to generate 1.11 times less return on investment than IShares Financial. But when comparing it to its historical volatility, iShares Insurance ETF is 1.06 times less risky than IShares Financial. It trades about 0.14 of its potential returns per unit of risk. iShares Financial Services is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 6,033 in iShares Financial Services on August 29, 2024 and sell it today you would earn a total of 2,173 from holding iShares Financial Services or generate 36.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Insurance ETF vs. iShares Financial Services
Performance |
| Timeline |
| iShares Insurance ETF |
| iShares Financial |
IShares Insurance and IShares Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Insurance and IShares Financial
The main advantage of trading using opposite IShares Insurance and IShares Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Insurance position performs unexpectedly, IShares Financial 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 Financial will offset losses from the drop in IShares Financial's long position.| IShares Insurance vs. iShares Broker Dealers Securities | IShares Insurance vs. SPDR SP Insurance | IShares Insurance vs. iShares Regional Banks | IShares Insurance vs. iShares Pharmaceuticals ETF |
| IShares Financial vs. iShares Financials ETF | IShares Financial vs. iShares Consumer Discretionary | IShares Financial vs. iShares Industrials ETF | IShares Financial vs. iShares Consumer Staples |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Money Managers Screen money managers from public funds and ETFs managed around the world |