Correlation Between IShares Healthcare and Health Care
Can any of the company-specific risk be diversified away by investing in both IShares Healthcare and Health Care 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 Health Care 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 Health Care Select, you can compare the effects of market volatilities on IShares Healthcare and Health Care 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 Health Care. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Healthcare and Health Care.
Diversification Opportunities for IShares Healthcare and Health Care
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between IShares and Health is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding iShares Healthcare ETF and Health Care Select in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Health Care Select 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 Health Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Health Care Select has no effect on the direction of IShares Healthcare i.e., IShares Healthcare and Health Care go up and down completely randomly.
Pair Corralation between IShares Healthcare and Health Care
Considering the 90-day investment horizon iShares Healthcare ETF is expected to generate about the same return on investment as Health Care Select. However, IShares Healthcare is 1.01 times more volatile than Health Care Select. It trades about 0.05 of its potential returns per unit of risk. Health Care Select is currently producing about 0.05 per unit of risk. If you would invest 12,613 in Health Care Select on November 9, 2024 and sell it today you would earn a total of 2,099 from holding Health Care Select or generate 16.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Healthcare ETF vs. Health Care Select
Performance |
| Timeline |
| iShares Healthcare ETF |
| Health Care Select |
IShares Healthcare and Health Care Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Healthcare and Health Care
The main advantage of trading using opposite IShares Healthcare and Health Care positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Healthcare position performs unexpectedly, Health Care 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 Health Care will offset losses from the drop in Health Care'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 |
| Health Care vs. Consumer Staples Select | Health Care vs. Industrial Select Sector | Health Care vs. Consumer Discretionary Select | Health Care vs. Utilities Select Sector |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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