Correlation Between IShares Consumer and IShares Financial
Can any of the company-specific risk be diversified away by investing in both IShares Consumer and IShares Financial 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 Consumer and IShares Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Consumer Discretionary and iShares Financial Services, you can compare the effects of market volatilities on IShares Consumer and IShares Financial 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 Consumer with a short position of IShares Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Consumer and IShares Financial.
Diversification Opportunities for IShares Consumer and IShares Financial
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Discretionary and iShares Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financial and IShares Consumer 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 Consumer Discretionary are associated (or correlated) with IShares Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financial has no effect on the direction of IShares Consumer i.e., IShares Consumer and IShares Financial go up and down completely randomly.
Pair Corralation between IShares Consumer and IShares Financial
Considering the 90-day investment horizon iShares Consumer Discretionary is expected to generate 0.69 times more return on investment than IShares Financial. However, iShares Consumer Discretionary is 1.45 times less risky than IShares Financial. It trades about 0.3 of its potential returns per unit of risk. iShares Financial Services is currently generating about 0.19 per unit of risk. If you would invest 8,253 in iShares Consumer Discretionary on August 29, 2024 and sell it today you would earn a total of 1,463 from holding iShares Consumer Discretionary or generate 17.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Consumer Discretionary vs. iShares Financial Services
Performance |
| Timeline |
| iShares Consumer Dis |
| iShares Financial |
IShares Consumer and IShares Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Consumer and IShares Financial
The main advantage of trading using opposite IShares Consumer and IShares Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Consumer position performs unexpectedly, IShares Financial 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 Financial will offset losses from the drop in IShares Financial's long position.| IShares Consumer vs. iShares Consumer Staples | IShares Consumer vs. iShares Industrials ETF | IShares Consumer vs. iShares Basic Materials | IShares Consumer vs. iShares Utilities ETF |
| IShares Financial vs. iShares Financials ETF | IShares Financial vs. iShares Consumer Discretionary | IShares Financial vs. iShares Industrials ETF | IShares Financial vs. iShares Consumer Staples |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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