Correlation Between IShares Energy and IShares Global
Can any of the company-specific risk be diversified away by investing in both IShares Energy and IShares Global 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 Global 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 Global Energy, you can compare the effects of market volatilities on IShares Energy and IShares Global 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 Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Energy and IShares Global.
Diversification Opportunities for IShares Energy and IShares Global
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares Energy ETF and iShares Global Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Energy 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 Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Energy has no effect on the direction of IShares Energy i.e., IShares Energy and IShares Global go up and down completely randomly.
Pair Corralation between IShares Energy and IShares Global
Considering the 90-day investment horizon iShares Energy ETF is expected to generate 1.22 times more return on investment than IShares Global. However, IShares Energy is 1.22 times more volatile than iShares Global Energy. It trades about 0.39 of its potential returns per unit of risk. iShares Global Energy is currently generating about 0.24 per unit of risk. If you would invest 4,713 in iShares Energy ETF on August 26, 2024 and sell it today you would earn a total of 425.00 from holding iShares Energy ETF or generate 9.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Energy ETF vs. iShares Global Energy
Performance |
| Timeline |
| iShares Energy ETF |
| iShares Global Energy |
IShares Energy and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Energy and IShares Global
The main advantage of trading using opposite IShares Energy and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Energy position performs unexpectedly, IShares Global 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 Global will offset losses from the drop in IShares Global'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 Global vs. iShares Energy ETF | IShares Global vs. iShares North American | IShares Global vs. iShares Global Financials | IShares Global vs. iShares Global Healthcare |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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