Correlation Between IShares Financial and IShares Basic
Can any of the company-specific risk be diversified away by investing in both IShares Financial 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 Financial 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 Financial Services and iShares Basic Materials, you can compare the effects of market volatilities on IShares Financial 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 Financial with a short position of IShares Basic. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Financial and IShares Basic.
Diversification Opportunities for IShares Financial and IShares Basic
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IShares and IShares is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding iShares Financial Services 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 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 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 Financial i.e., IShares Financial and IShares Basic go up and down completely randomly.
Pair Corralation between IShares Financial and IShares Basic
Considering the 90-day investment horizon iShares Financial Services is expected to generate 1.05 times more return on investment than IShares Basic. However, IShares Financial is 1.05 times more volatile than iShares Basic Materials. It trades about 0.09 of its potential returns per unit of risk. iShares Basic Materials is currently generating about 0.04 per unit of risk. If you would invest 5,139 in iShares Financial Services on August 28, 2024 and sell it today you would earn a total of 3,070 from holding iShares Financial Services or generate 59.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Financial Services vs. iShares Basic Materials
Performance |
| Timeline |
| iShares Financial |
| iShares Basic Materials |
IShares Financial and IShares Basic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Financial and IShares Basic
The main advantage of trading using opposite IShares Financial and IShares Basic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Financial 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 Financial vs. iShares Financials ETF | IShares Financial vs. iShares Consumer Discretionary | IShares Financial vs. iShares Industrials ETF | IShares Financial vs. iShares Consumer Staples |
| IShares Basic vs. iShares Industrials ETF | IShares Basic vs. iShares Consumer Discretionary | IShares Basic vs. iShares Consumer Staples | IShares Basic vs. iShares Telecommunications 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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