Correlation Between IShares Healthcare and IShares Energy
Can any of the company-specific risk be diversified away by investing in both IShares Healthcare and IShares Energy 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 Energy 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 Energy ETF, you can compare the effects of market volatilities on IShares Healthcare and IShares Energy 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 Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Healthcare and IShares Energy.
Diversification Opportunities for IShares Healthcare and IShares Energy
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between IShares and IShares is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding iShares Healthcare ETF and iShares Energy ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Energy ETF 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 Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Energy ETF has no effect on the direction of IShares Healthcare i.e., IShares Healthcare and IShares Energy go up and down completely randomly.
Pair Corralation between IShares Healthcare and IShares Energy
Considering the 90-day investment horizon iShares Healthcare ETF is expected to under-perform the IShares Energy. But the etf apears to be less risky and, when comparing its historical volatility, iShares Healthcare ETF is 1.38 times less risky than IShares Energy. The etf trades about -0.05 of its potential returns per unit of risk. The iShares Energy ETF is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,682 in iShares Energy ETF on October 25, 2024 and sell it today you would earn a total of 204.00 from holding iShares Energy ETF or generate 4.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Healthcare ETF vs. iShares Energy ETF
Performance |
| Timeline |
| iShares Healthcare ETF |
| iShares Energy ETF |
IShares Healthcare and IShares Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Healthcare and IShares Energy
The main advantage of trading using opposite IShares Healthcare and IShares Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Healthcare position performs unexpectedly, IShares Energy 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 Energy will offset losses from the drop in IShares Energy'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 Energy vs. iShares Basic Materials | IShares Energy vs. iShares Utilities ETF | IShares Energy vs. iShares Financials ETF | IShares Energy vs. iShares Healthcare 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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