Correlation Between IShares Utilities and IShares Industrials
Can any of the company-specific risk be diversified away by investing in both IShares Utilities and IShares Industrials 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 Utilities and IShares Industrials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Utilities ETF and iShares Industrials ETF, you can compare the effects of market volatilities on IShares Utilities and IShares Industrials 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 Utilities with a short position of IShares Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Utilities and IShares Industrials.
Diversification Opportunities for IShares Utilities and IShares Industrials
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding iShares Utilities ETF and iShares Industrials ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Industrials ETF and IShares Utilities 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 Utilities ETF are associated (or correlated) with IShares Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Industrials ETF has no effect on the direction of IShares Utilities i.e., IShares Utilities and IShares Industrials go up and down completely randomly.
Pair Corralation between IShares Utilities and IShares Industrials
Considering the 90-day investment horizon IShares Utilities is expected to generate 1.92 times less return on investment than IShares Industrials. In addition to that, IShares Utilities is 1.37 times more volatile than iShares Industrials ETF. It trades about 0.12 of its total potential returns per unit of risk. iShares Industrials ETF is currently generating about 0.31 per unit of volatility. If you would invest 13,282 in iShares Industrials ETF on November 3, 2024 and sell it today you would earn a total of 771.00 from holding iShares Industrials ETF or generate 5.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Utilities ETF vs. iShares Industrials ETF
Performance |
| Timeline |
| iShares Utilities ETF |
| iShares Industrials ETF |
IShares Utilities and IShares Industrials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Utilities and IShares Industrials
The main advantage of trading using opposite IShares Utilities and IShares Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Utilities position performs unexpectedly, IShares Industrials 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 Industrials will offset losses from the drop in IShares Industrials' long position.| IShares Utilities vs. iShares Industrials ETF | IShares Utilities vs. iShares Consumer Discretionary | IShares Utilities vs. iShares Consumer Staples | IShares Utilities vs. iShares Telecommunications ETF |
| IShares Industrials vs. iShares Consumer Discretionary | IShares Industrials vs. iShares Consumer Staples | IShares Industrials vs. iShares Basic Materials | IShares Industrials vs. iShares Utilities 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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