Correlation Between IShares Financials and IShares Basic
Can any of the company-specific risk be diversified away by investing in both IShares Financials and IShares Basic 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 Basic 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 Basic Materials, you can compare the effects of market volatilities on IShares Financials and IShares Basic 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 Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Financials and IShares Basic.
Diversification Opportunities for IShares Financials and IShares Basic
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between IShares and IShares is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding iShares Financials ETF and iShares Basic Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Basic Materials 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 Basic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Basic Materials has no effect on the direction of IShares Financials i.e., IShares Financials and IShares Basic go up and down completely randomly.
Pair Corralation between IShares Financials and IShares Basic
Considering the 90-day investment horizon iShares Financials ETF is expected to generate 1.99 times more return on investment than IShares Basic. However, IShares Financials is 1.99 times more volatile than iShares Basic Materials. It trades about 0.26 of its potential returns per unit of risk. iShares Basic Materials is currently generating about -0.03 per unit of risk. If you would invest 10,841 in iShares Financials ETF on August 31, 2024 and sell it today you would earn a total of 1,056 from holding iShares Financials ETF or generate 9.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Financials ETF vs. iShares Basic Materials
Performance |
| Timeline |
| iShares Financials ETF |
| iShares Basic Materials |
IShares Financials and IShares Basic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Financials and IShares Basic
The main advantage of trading using opposite IShares Financials and IShares Basic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Financials position performs unexpectedly, IShares Basic 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 Basic will offset losses from the drop in IShares Basic'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 Basic vs. Mast Global Battery | IShares Basic vs. Materials Select Sector | IShares Basic vs. Vanguard Materials Index | IShares Basic vs. SPDR SP Metals |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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