Correlation Between IShares Trust and IShares Healthcare
Can any of the company-specific risk be diversified away by investing in both IShares Trust and IShares Healthcare 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 Trust and IShares Healthcare into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and iShares Healthcare Providers, you can compare the effects of market volatilities on IShares Trust and IShares Healthcare 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 Trust with a short position of IShares Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and IShares Healthcare.
Diversification Opportunities for IShares Trust and IShares Healthcare
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and IShares is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and iShares Healthcare Providers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Healthcare and IShares Trust 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 Trust are associated (or correlated) with IShares Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Healthcare has no effect on the direction of IShares Trust i.e., IShares Trust and IShares Healthcare go up and down completely randomly.
Pair Corralation between IShares Trust and IShares Healthcare
Given the investment horizon of 90 days iShares Trust is expected to generate 0.5 times more return on investment than IShares Healthcare. However, iShares Trust is 1.99 times less risky than IShares Healthcare. It trades about 0.1 of its potential returns per unit of risk. iShares Healthcare Providers is currently generating about -0.09 per unit of risk. If you would invest 3,068 in iShares Trust on August 29, 2024 and sell it today you would earn a total of 102.00 from holding iShares Trust or generate 3.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Trust vs. iShares Healthcare Providers
Performance |
| Timeline |
| iShares Trust |
| iShares Healthcare |
IShares Trust and IShares Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and IShares Healthcare
The main advantage of trading using opposite IShares Trust and IShares Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, IShares Healthcare 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 Healthcare will offset losses from the drop in IShares Healthcare's long position.| IShares Trust vs. First Trust Multi Asset | IShares Trust vs. Collaborative Investment Series | IShares Trust vs. Akros Monthly Payout | IShares Trust vs. Northern Lights |
| IShares Healthcare vs. iShares Pharmaceuticals ETF | IShares Healthcare vs. iShares Medical Devices | IShares Healthcare vs. iShares Healthcare ETF | IShares Healthcare vs. iShares Broker Dealers Securities |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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