Correlation Between IShares Utilities and IShares Short
Can any of the company-specific risk be diversified away by investing in both IShares Utilities and IShares Short 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 Short 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 Short Maturity, you can compare the effects of market volatilities on IShares Utilities and IShares Short 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 Short. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Utilities and IShares Short.
Diversification Opportunities for IShares Utilities and IShares Short
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding iShares Utilities ETF and iShares Short Maturity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Short Maturity 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 Short. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Short Maturity has no effect on the direction of IShares Utilities i.e., IShares Utilities and IShares Short go up and down completely randomly.
Pair Corralation between IShares Utilities and IShares Short
Considering the 90-day investment horizon iShares Utilities ETF is expected to generate 11.45 times more return on investment than IShares Short. However, IShares Utilities is 11.45 times more volatile than iShares Short Maturity. It trades about 0.08 of its potential returns per unit of risk. iShares Short Maturity is currently generating about 0.2 per unit of risk. If you would invest 10,225 in iShares Utilities ETF on August 28, 2024 and sell it today you would earn a total of 176.00 from holding iShares Utilities ETF or generate 1.72% 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 Short Maturity
Performance |
| Timeline |
| iShares Utilities ETF |
| iShares Short Maturity |
IShares Utilities and IShares Short Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Utilities and IShares Short
The main advantage of trading using opposite IShares Utilities and IShares Short positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Utilities position performs unexpectedly, IShares Short 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 Short will offset losses from the drop in IShares Short's 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 Short vs. Dimensional ETF Trust | IShares Short vs. Dimensional ETF Trust | IShares Short vs. Dimensional ETF Trust | IShares Short vs. Dimensional Emerging Core |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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