Correlation Between IShares Healthcare and IShares Technology
Can any of the company-specific risk be diversified away by investing in both IShares Healthcare and IShares Technology 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 Technology 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 Technology ETF, you can compare the effects of market volatilities on IShares Healthcare and IShares Technology 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 Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Healthcare and IShares Technology.
Diversification Opportunities for IShares Healthcare and IShares Technology
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and IShares is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding iShares Healthcare ETF and iShares Technology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Technology 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 Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Technology ETF has no effect on the direction of IShares Healthcare i.e., IShares Healthcare and IShares Technology go up and down completely randomly.
Pair Corralation between IShares Healthcare and IShares Technology
Considering the 90-day investment horizon IShares Healthcare is expected to generate 5.74 times less return on investment than IShares Technology. But when comparing it to its historical volatility, iShares Healthcare ETF is 2.04 times less risky than IShares Technology. It trades about 0.02 of its potential returns per unit of risk. iShares Technology ETF is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 14,290 in iShares Technology ETF on August 24, 2024 and sell it today you would earn a total of 1,607 from holding iShares Technology ETF or generate 11.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Healthcare ETF vs. iShares Technology ETF
Performance |
| Timeline |
| iShares Healthcare ETF |
| iShares Technology ETF |
IShares Healthcare and IShares Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Healthcare and IShares Technology
The main advantage of trading using opposite IShares Healthcare and IShares Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Healthcare position performs unexpectedly, IShares Technology 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 Technology will offset losses from the drop in IShares Technology'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 Technology vs. iShares Healthcare ETF | IShares Technology vs. iShares Financials ETF | IShares Technology vs. iShares Telecommunications ETF | IShares Technology vs. iShares Industrials 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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