Correlation Between IShares Consumer and IShares Telecommunicatio
Can any of the company-specific risk be diversified away by investing in both IShares Consumer and IShares Telecommunicatio 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 Telecommunicatio 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 Telecommunications ETF, you can compare the effects of market volatilities on IShares Consumer and IShares Telecommunicatio 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 Telecommunicatio. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Consumer and IShares Telecommunicatio.
Diversification Opportunities for IShares Consumer and IShares Telecommunicatio
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Discretionary and iShares Telecommunications ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares Telecommunicatio 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 Telecommunicatio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares Telecommunicatio has no effect on the direction of IShares Consumer i.e., IShares Consumer and IShares Telecommunicatio go up and down completely randomly.
Pair Corralation between IShares Consumer and IShares Telecommunicatio
Considering the 90-day investment horizon IShares Consumer is expected to generate 1.48 times less return on investment than IShares Telecommunicatio. But when comparing it to its historical volatility, iShares Consumer Discretionary is 1.54 times less risky than IShares Telecommunicatio. It trades about 0.21 of its potential returns per unit of risk. iShares Telecommunications ETF is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,729 in iShares Telecommunications ETF on November 18, 2024 and sell it today you would earn a total of 124.00 from holding iShares Telecommunications ETF or generate 4.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Consumer Discretionary vs. iShares Telecommunications ETF
Performance |
| Timeline |
| iShares Consumer Dis |
| IShares Telecommunicatio |
IShares Consumer and IShares Telecommunicatio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Consumer and IShares Telecommunicatio
The main advantage of trading using opposite IShares Consumer and IShares Telecommunicatio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Consumer position performs unexpectedly, IShares Telecommunicatio 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 Telecommunicatio will offset losses from the drop in IShares Telecommunicatio'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 |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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