Correlation Between IShares Healthcare and IShares Aerospace
Can any of the company-specific risk be diversified away by investing in both IShares Healthcare and IShares Aerospace 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 Healthcare and IShares Aerospace into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Healthcare ETF and iShares Aerospace Defense, you can compare the effects of market volatilities on IShares Healthcare and IShares Aerospace 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 Healthcare with a short position of IShares Aerospace. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Healthcare and IShares Aerospace.
Diversification Opportunities for IShares Healthcare and IShares Aerospace
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between IShares and IShares is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding iShares Healthcare ETF and iShares Aerospace Defense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Aerospace Defense and IShares Healthcare 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 Healthcare ETF are associated (or correlated) with IShares Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Aerospace Defense has no effect on the direction of IShares Healthcare i.e., IShares Healthcare and IShares Aerospace go up and down completely randomly.
Pair Corralation between IShares Healthcare and IShares Aerospace
Considering the 90-day investment horizon iShares Healthcare ETF is expected to under-perform the IShares Aerospace. But the etf apears to be less risky and, when comparing its historical volatility, iShares Healthcare ETF is 1.73 times less risky than IShares Aerospace. The etf trades about -0.09 of its potential returns per unit of risk. The iShares Aerospace Defense is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 14,870 in iShares Aerospace Defense on August 28, 2024 and sell it today you would earn a total of 599.00 from holding iShares Aerospace Defense or generate 4.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Healthcare ETF vs. iShares Aerospace Defense
Performance |
| Timeline |
| iShares Healthcare ETF |
| iShares Aerospace Defense |
IShares Healthcare and IShares Aerospace Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Healthcare and IShares Aerospace
The main advantage of trading using opposite IShares Healthcare and IShares Aerospace positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Healthcare position performs unexpectedly, IShares Aerospace 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 Aerospace will offset losses from the drop in IShares Aerospace's long position.| IShares Healthcare vs. iShares Financials ETF | IShares Healthcare vs. iShares Consumer Discretionary | IShares Healthcare vs. iShares Industrials ETF | IShares Healthcare vs. iShares Consumer Staples |
| IShares Aerospace vs. SPDR SP Aerospace | IShares Aerospace vs. Invesco Aerospace Defense | IShares Aerospace vs. iShares Medical Devices | IShares Aerospace vs. iShares Expanded Tech Software |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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