Correlation Between IShares Aerospace and NATO
Can any of the company-specific risk be diversified away by investing in both IShares Aerospace and NATO 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 Aerospace and NATO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Aerospace Defense and NATO, you can compare the effects of market volatilities on IShares Aerospace and NATO 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 Aerospace with a short position of NATO. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Aerospace and NATO.
Diversification Opportunities for IShares Aerospace and NATO
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and NATO is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding iShares Aerospace Defense and NATO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NATO and IShares Aerospace 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 Aerospace Defense are associated (or correlated) with NATO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NATO has no effect on the direction of IShares Aerospace i.e., IShares Aerospace and NATO go up and down completely randomly.
Pair Corralation between IShares Aerospace and NATO
Considering the 90-day investment horizon iShares Aerospace Defense is expected to under-perform the NATO. In addition to that, IShares Aerospace is 1.01 times more volatile than NATO. It trades about -0.09 of its total potential returns per unit of risk. NATO is currently generating about 0.03 per unit of volatility. If you would invest 2,590 in NATO on September 15, 2024 and sell it today you would earn a total of 12.00 from holding NATO or generate 0.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Aerospace Defense vs. NATO
Performance |
| Timeline |
| iShares Aerospace Defense |
| NATO |
IShares Aerospace and NATO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Aerospace and NATO
The main advantage of trading using opposite IShares Aerospace and NATO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Aerospace position performs unexpectedly, NATO 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 NATO will offset losses from the drop in NATO's long position.| IShares Aerospace vs. SPDR SP Aerospace | IShares Aerospace vs. Invesco Aerospace Defense | IShares Aerospace vs. iShares Medical Devices | IShares Aerospace vs. iShares Expanded Tech Software |
| NATO vs. Invesco DWA Utilities | NATO vs. Invesco Dynamic Food | NATO vs. SCOR PK | NATO vs. Morningstar Unconstrained Allocation |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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