Correlation Between IShares Healthcare and IShares Industrials
Can any of the company-specific risk be diversified away by investing in both IShares Healthcare and IShares Industrials 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 Industrials 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 Industrials ETF, you can compare the effects of market volatilities on IShares Healthcare and IShares Industrials 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 Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Healthcare and IShares Industrials.
Diversification Opportunities for IShares Healthcare and IShares Industrials
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding iShares Healthcare ETF and iShares Industrials ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Industrials 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 Industrials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Industrials ETF has no effect on the direction of IShares Healthcare i.e., IShares Healthcare and IShares Industrials go up and down completely randomly.
Pair Corralation between IShares Healthcare and IShares Industrials
Considering the 90-day investment horizon iShares Healthcare ETF is expected to generate 1.21 times more return on investment than IShares Industrials. However, IShares Healthcare is 1.21 times more volatile than iShares Industrials ETF. It trades about 0.15 of its potential returns per unit of risk. iShares Industrials ETF is currently generating about 0.04 per unit of risk. If you would invest 5,931 in iShares Healthcare ETF on November 18, 2024 and sell it today you would earn a total of 162.00 from holding iShares Healthcare ETF or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Healthcare ETF vs. iShares Industrials ETF
Performance |
| Timeline |
| iShares Healthcare ETF |
| iShares Industrials ETF |
IShares Healthcare and IShares Industrials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Healthcare and IShares Industrials
The main advantage of trading using opposite IShares Healthcare and IShares Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Healthcare position performs unexpectedly, IShares Industrials 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 Industrials will offset losses from the drop in IShares Industrials' 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 Industrials vs. iShares Consumer Discretionary | IShares Industrials vs. iShares Consumer Staples | IShares Industrials vs. iShares Basic Materials | IShares Industrials vs. iShares Utilities 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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