Correlation Between IShares Financials and IShares Consumer
Can any of the company-specific risk be diversified away by investing in both IShares Financials and IShares Consumer 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 Consumer 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 Consumer Discretionary, you can compare the effects of market volatilities on IShares Financials and IShares Consumer 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 Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Financials and IShares Consumer.
Diversification Opportunities for IShares Financials and IShares Consumer
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 Financials ETF and iShares Consumer Discretionary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Consumer Dis 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 Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Consumer Dis has no effect on the direction of IShares Financials i.e., IShares Financials and IShares Consumer go up and down completely randomly.
Pair Corralation between IShares Financials and IShares Consumer
Considering the 90-day investment horizon IShares Financials is expected to generate 1.02 times less return on investment than IShares Consumer. But when comparing it to its historical volatility, iShares Financials ETF is 1.0 times less risky than IShares Consumer. It trades about 0.1 of its potential returns per unit of risk. iShares Consumer Discretionary is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5,981 in iShares Consumer Discretionary on August 27, 2024 and sell it today you would earn a total of 3,618 from holding iShares Consumer Discretionary or generate 60.49% 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 Consumer Discretionary
Performance |
| Timeline |
| iShares Financials ETF |
| iShares Consumer Dis |
IShares Financials and IShares Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Financials and IShares Consumer
The main advantage of trading using opposite IShares Financials and IShares Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Financials position performs unexpectedly, IShares Consumer 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 Consumer will offset losses from the drop in IShares Consumer's long position.| IShares Financials vs. UBS AG London | IShares Financials vs. UBS AG London | IShares Financials vs. ETRACS Quarterly Pay | IShares Financials vs. ETRACS 2xMonthly Pay |
| IShares Consumer vs. VanEck Pharmaceutical ETF | IShares Consumer vs. VanEck Biotech ETF | IShares Consumer vs. VanEck Oil Services | IShares Consumer vs. iShares Transportation Average |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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