Correlation Between IShares Medical and IShares Aerospace
Can any of the company-specific risk be diversified away by investing in both IShares Medical and IShares Aerospace 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 Medical and IShares Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Medical Devices and iShares Aerospace Defense, you can compare the effects of market volatilities on IShares Medical and IShares Aerospace 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 Medical with a short position of IShares Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Medical and IShares Aerospace.
Diversification Opportunities for IShares Medical and IShares Aerospace
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding iShares Medical Devices and iShares Aerospace Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Aerospace Defense and IShares Medical 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 Medical Devices are associated (or correlated) with IShares Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Aerospace Defense has no effect on the direction of IShares Medical i.e., IShares Medical and IShares Aerospace go up and down completely randomly.
Pair Corralation between IShares Medical and IShares Aerospace
Considering the 90-day investment horizon iShares Medical Devices is expected to generate about the same return on investment as iShares Aerospace Defense. But, iShares Medical Devices is 2.03 times less risky than IShares Aerospace. It trades about 0.19 of its potential returns per unit of risk. iShares Aerospace Defense is currently generating about 0.09 per unit of risk. If you would invest 14,870 in iShares Aerospace Defense on August 28, 2024 and sell it today you would earn a total of 418.00 from holding iShares Aerospace Defense or generate 2.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Medical Devices vs. iShares Aerospace Defense
Performance |
| Timeline |
| iShares Medical Devices |
| iShares Aerospace Defense |
IShares Medical and IShares Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Medical and IShares Aerospace
The main advantage of trading using opposite IShares Medical and IShares Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Medical position performs unexpectedly, IShares Aerospace 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 Aerospace will offset losses from the drop in IShares Aerospace's long position.| IShares Medical vs. Global X Clean | IShares Medical vs. Global X Renewable | IShares Medical vs. Global X Thematic | IShares Medical vs. Global X AgTech |
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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