Correlation Between IShares Trust and Applied Materials
Can any of the company-specific risk be diversified away by investing in both IShares Trust and Applied Materials 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 Applied Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Trust and Applied Materials, you can compare the effects of market volatilities on IShares Trust and Applied Materials 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 Applied Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Trust and Applied Materials.
Diversification Opportunities for IShares Trust and Applied Materials
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between IShares and Applied is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding iShares Trust and Applied Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials 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 Applied Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials has no effect on the direction of IShares Trust i.e., IShares Trust and Applied Materials go up and down completely randomly.
Pair Corralation between IShares Trust and Applied Materials
Assuming the 90 days trading horizon iShares Trust is expected to generate 0.85 times more return on investment than Applied Materials. However, iShares Trust is 1.17 times less risky than Applied Materials. It trades about 0.1 of its potential returns per unit of risk. Applied Materials is currently generating about 0.07 per unit of risk. If you would invest 127,073 in iShares Trust on September 3, 2024 and sell it today you would earn a total of 56,914 from holding iShares Trust or generate 44.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 73.58% |
| Values | Daily Returns |
iShares Trust vs. Applied Materials
Performance |
| Timeline |
| iShares Trust |
| Applied Materials |
IShares Trust and Applied Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Trust and Applied Materials
The main advantage of trading using opposite IShares Trust and Applied Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Trust position performs unexpectedly, Applied Materials 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 Applied Materials will offset losses from the drop in Applied Materials' long position.| IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust |
| Applied Materials vs. The Select Sector | Applied Materials vs. Promotora y Operadora | Applied Materials vs. SPDR Series Trust | Applied Materials vs. Vanguard World |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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