Correlation Between IShares Financial and IShares Insurance
Can any of the company-specific risk be diversified away by investing in both IShares Financial and IShares Insurance 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 Financial and IShares Insurance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Financial Services and iShares Insurance ETF, you can compare the effects of market volatilities on IShares Financial and IShares Insurance 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 Financial with a short position of IShares Insurance. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Financial and IShares Insurance.
Diversification Opportunities for IShares Financial and IShares Insurance
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares Financial Services and iShares Insurance ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Insurance ETF and IShares Financial 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 Financial Services are associated (or correlated) with IShares Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Insurance ETF has no effect on the direction of IShares Financial i.e., IShares Financial and IShares Insurance go up and down completely randomly.
Pair Corralation between IShares Financial and IShares Insurance
Considering the 90-day investment horizon iShares Financial Services is expected to generate 1.05 times more return on investment than IShares Insurance. However, IShares Financial is 1.05 times more volatile than iShares Insurance ETF. It trades about 0.14 of its potential returns per unit of risk. iShares Insurance ETF is currently generating about 0.12 per unit of risk. If you would invest 6,267 in iShares Financial Services on August 25, 2024 and sell it today you would earn a total of 1,879 from holding iShares Financial Services or generate 29.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Financial Services vs. iShares Insurance ETF
Performance |
| Timeline |
| iShares Financial |
| iShares Insurance ETF |
IShares Financial and IShares Insurance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Financial and IShares Insurance
The main advantage of trading using opposite IShares Financial and IShares Insurance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Financial position performs unexpectedly, IShares Insurance 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 Insurance will offset losses from the drop in IShares Insurance's long position.| IShares Financial vs. iShares Financials ETF | IShares Financial vs. iShares Consumer Discretionary | IShares Financial vs. iShares Industrials ETF | IShares Financial vs. iShares Consumer Staples |
| IShares Insurance vs. iShares Broker Dealers Securities | IShares Insurance vs. SPDR SP Insurance | IShares Insurance vs. iShares Regional Banks | IShares Insurance vs. iShares Pharmaceuticals ETF |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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