Correlation Between Intel and IShares Energy
Can any of the company-specific risk be diversified away by investing in both Intel and IShares Energy 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 Intel and IShares Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Intel and iShares Energy ETF, you can compare the effects of market volatilities on Intel and IShares Energy 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 Intel with a short position of IShares Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Intel and IShares Energy.
Diversification Opportunities for Intel and IShares Energy
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Intel and IShares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Intel and iShares Energy ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Energy ETF and Intel 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 Intel are associated (or correlated) with IShares Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Energy ETF has no effect on the direction of Intel i.e., Intel and IShares Energy go up and down completely randomly.
Pair Corralation between Intel and IShares Energy
Given the investment horizon of 90 days Intel is expected to under-perform the IShares Energy. In addition to that, Intel is 2.92 times more volatile than iShares Energy ETF. It trades about -0.06 of its total potential returns per unit of risk. iShares Energy ETF is currently generating about 0.07 per unit of volatility. If you would invest 4,322 in iShares Energy ETF on August 26, 2024 and sell it today you would earn a total of 816.00 from holding iShares Energy ETF or generate 18.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Intel vs. iShares Energy ETF
Performance |
| Timeline |
| Intel |
| iShares Energy ETF |
Intel and IShares Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Intel and IShares Energy
The main advantage of trading using opposite Intel and IShares Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intel position performs unexpectedly, IShares Energy 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 Energy will offset losses from the drop in IShares Energy's long position.The idea behind Intel and iShares Energy ETF pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| IShares Energy vs. iShares Basic Materials | IShares Energy vs. iShares Utilities ETF | IShares Energy vs. iShares Financials ETF | IShares Energy vs. iShares Healthcare 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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