Correlation Between IShares Energy and IShares Oil
Can any of the company-specific risk be diversified away by investing in both IShares Energy and IShares Oil 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 Energy and IShares Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Energy ETF and iShares Oil Equipment, you can compare the effects of market volatilities on IShares Energy and IShares Oil 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 Energy with a short position of IShares Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Energy and IShares Oil.
Diversification Opportunities for IShares Energy and IShares Oil
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares Energy ETF and iShares Oil Equipment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Oil Equipment and IShares Energy 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 Energy ETF are associated (or correlated) with IShares Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Oil Equipment has no effect on the direction of IShares Energy i.e., IShares Energy and IShares Oil go up and down completely randomly.
Pair Corralation between IShares Energy and IShares Oil
Considering the 90-day investment horizon iShares Energy ETF is expected to generate 0.68 times more return on investment than IShares Oil. However, iShares Energy ETF is 1.47 times less risky than IShares Oil. It trades about 0.03 of its potential returns per unit of risk. iShares Oil Equipment is currently generating about 0.01 per unit of risk. If you would invest 4,403 in iShares Energy ETF on August 28, 2024 and sell it today you would earn a total of 634.00 from holding iShares Energy ETF or generate 14.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Energy ETF vs. iShares Oil Equipment
Performance |
| Timeline |
| iShares Energy ETF |
| iShares Oil Equipment |
IShares Energy and IShares Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Energy and IShares Oil
The main advantage of trading using opposite IShares Energy and IShares Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Energy position performs unexpectedly, IShares Oil 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 Oil will offset losses from the drop in IShares Oil's long position.| IShares Energy vs. iShares Basic Materials | IShares Energy vs. iShares Utilities ETF | IShares Energy vs. iShares Financials ETF | IShares Energy vs. iShares Healthcare ETF |
| IShares Oil vs. EA Series Trust | IShares Oil vs. EA Series Trust | IShares Oil vs. Rumble Inc | IShares Oil vs. EA Series Trust |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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