Correlation Between IShares Home and Consumer Discretionary
Can any of the company-specific risk be diversified away by investing in both IShares Home and Consumer Discretionary 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 Home and Consumer Discretionary into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Home Construction and Consumer Discretionary Select, you can compare the effects of market volatilities on IShares Home and Consumer Discretionary 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 Home with a short position of Consumer Discretionary. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Home and Consumer Discretionary.
Diversification Opportunities for IShares Home and Consumer Discretionary
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and Consumer is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding iShares Home Construction and Consumer Discretionary Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Discretionary and IShares Home 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 Home Construction are associated (or correlated) with Consumer Discretionary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Discretionary has no effect on the direction of IShares Home i.e., IShares Home and Consumer Discretionary go up and down completely randomly.
Pair Corralation between IShares Home and Consumer Discretionary
Considering the 90-day investment horizon iShares Home Construction is expected to generate 1.37 times more return on investment than Consumer Discretionary. However, IShares Home is 1.37 times more volatile than Consumer Discretionary Select. It trades about 0.08 of its potential returns per unit of risk. Consumer Discretionary Select is currently generating about 0.1 per unit of risk. If you would invest 6,585 in iShares Home Construction on November 1, 2024 and sell it today you would earn a total of 4,426 from holding iShares Home Construction or generate 67.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Home Construction vs. Consumer Discretionary Select
Performance |
| Timeline |
| iShares Home Construction |
| Consumer Discretionary |
IShares Home and Consumer Discretionary Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Home and Consumer Discretionary
The main advantage of trading using opposite IShares Home and Consumer Discretionary positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Home position performs unexpectedly, Consumer Discretionary 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 Consumer Discretionary will offset losses from the drop in Consumer Discretionary's long position.| IShares Home vs. SPDR SP Homebuilders | IShares Home vs. SPDR SP Retail | IShares Home vs. iShares Transportation Average | IShares Home vs. iShares Real Estate |
| Consumer Discretionary vs. Consumer Staples Select | Consumer Discretionary vs. Industrial Select Sector | Consumer Discretionary vs. Materials Select Sector | Consumer Discretionary vs. Health Care Select |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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