Correlation Between IShares Consumer and IShares Healthcare
Can any of the company-specific risk be diversified away by investing in both IShares Consumer 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 Consumer 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 Consumer Discretionary and iShares Healthcare ETF, you can compare the effects of market volatilities on IShares Consumer 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 Consumer with a short position of IShares Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Consumer and IShares Healthcare.
Diversification Opportunities for IShares Consumer and IShares Healthcare
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between IShares and IShares is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Discretionary and iShares Healthcare ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Healthcare ETF 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 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 ETF has no effect on the direction of IShares Consumer i.e., IShares Consumer and IShares Healthcare go up and down completely randomly.
Pair Corralation between IShares Consumer and IShares Healthcare
Considering the 90-day investment horizon iShares Consumer Discretionary is expected to generate 1.44 times more return on investment than IShares Healthcare. However, IShares Consumer is 1.44 times more volatile than iShares Healthcare ETF. It trades about 0.09 of its potential returns per unit of risk. iShares Healthcare ETF is currently generating about 0.02 per unit of risk. If you would invest 6,236 in iShares Consumer Discretionary on August 23, 2024 and sell it today you would earn a total of 3,232 from holding iShares Consumer Discretionary or generate 51.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Consumer Discretionary vs. iShares Healthcare ETF
Performance |
| Timeline |
| iShares Consumer Dis |
| iShares Healthcare ETF |
IShares Consumer and IShares Healthcare Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Consumer and IShares Healthcare
The main advantage of trading using opposite IShares Consumer and IShares Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Consumer 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 Consumer vs. iShares Consumer Staples | IShares Consumer vs. iShares Industrials ETF | IShares Consumer vs. iShares Basic Materials | IShares Consumer vs. iShares Utilities ETF |
| IShares Healthcare vs. iShares Financials ETF | IShares Healthcare vs. iShares Consumer Discretionary | IShares Healthcare vs. iShares Industrials ETF | IShares Healthcare 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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