Correlation Between IShares Oil and Energy Select
Can any of the company-specific risk be diversified away by investing in both IShares Oil and Energy Select 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 Oil and Energy Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Oil Gas and Energy Select Sector, you can compare the effects of market volatilities on IShares Oil and Energy Select 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 Oil with a short position of Energy Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Oil and Energy Select.
Diversification Opportunities for IShares Oil and Energy Select
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Energy is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Oil Gas and Energy Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Select Sector and IShares Oil 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 Oil Gas are associated (or correlated) with Energy Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Select Sector has no effect on the direction of IShares Oil i.e., IShares Oil and Energy Select go up and down completely randomly.
Pair Corralation between IShares Oil and Energy Select
Considering the 90-day investment horizon iShares Oil Gas is expected to generate 1.14 times more return on investment than Energy Select. However, IShares Oil is 1.14 times more volatile than Energy Select Sector. It trades about 0.02 of its potential returns per unit of risk. Energy Select Sector is currently generating about 0.01 per unit of risk. If you would invest 8,879 in iShares Oil Gas on November 2, 2024 and sell it today you would earn a total of 583.00 from holding iShares Oil Gas or generate 6.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Oil Gas vs. Energy Select Sector
Performance |
| Timeline |
| iShares Oil Gas |
| Energy Select Sector |
IShares Oil and Energy Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Oil and Energy Select
The main advantage of trading using opposite IShares Oil and Energy Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Oil position performs unexpectedly, Energy Select 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 Energy Select will offset losses from the drop in Energy Select's long position.| IShares Oil vs. iShares Oil Equipment | IShares Oil vs. iShares Energy ETF | IShares Oil vs. Invesco Dynamic Energy | IShares Oil vs. SPDR SP Oil |
| Energy Select vs. Financial Select Sector | Energy Select vs. Health Care Select | Energy Select vs. Technology Select Sector | Energy Select vs. Utilities Select Sector |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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