Correlation Between IShares Financials and IShares Global
Can any of the company-specific risk be diversified away by investing in both IShares Financials 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 Financials 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 Financials ETF and iShares Global Financials, you can compare the effects of market volatilities on IShares Financials 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 Financials with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Financials and IShares Global.
Diversification Opportunities for IShares Financials and IShares Global
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding iShares Financials ETF and iShares Global Financials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Financials and IShares Financials 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 Financials 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 Financials has no effect on the direction of IShares Financials i.e., IShares Financials and IShares Global go up and down completely randomly.
Pair Corralation between IShares Financials and IShares Global
Considering the 90-day investment horizon iShares Financials ETF is expected to generate 1.76 times more return on investment than IShares Global. However, IShares Financials is 1.76 times more volatile than iShares Global Financials. It trades about 0.2 of its potential returns per unit of risk. iShares Global Financials is currently generating about 0.2 per unit of risk. If you would invest 10,827 in iShares Financials ETF on August 24, 2024 and sell it today you would earn a total of 813.00 from holding iShares Financials ETF or generate 7.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Financials ETF vs. iShares Global Financials
Performance |
| Timeline |
| iShares Financials ETF |
| iShares Global Financials |
IShares Financials and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Financials and IShares Global
The main advantage of trading using opposite IShares Financials and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Financials 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 Financials vs. iShares Financial Services | IShares Financials vs. iShares Industrials ETF | IShares Financials vs. iShares Consumer Discretionary | IShares Financials vs. iShares Healthcare ETF |
| IShares Global vs. iShares Global Comm | IShares Global vs. iShares Global Healthcare | IShares Global vs. iShares Global Tech | IShares Global vs. iShares Financial Services |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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