Correlation Between IShares Industrials and IShares Financials
Can any of the company-specific risk be diversified away by investing in both IShares Industrials and IShares Financials 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 Industrials and IShares Financials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Industrials ETF and iShares Financials ETF, you can compare the effects of market volatilities on IShares Industrials and IShares Financials 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 Industrials with a short position of IShares Financials. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Industrials and IShares Financials.
Diversification Opportunities for IShares Industrials and IShares Financials
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares Industrials ETF and iShares Financials ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financials ETF and IShares Industrials 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 Industrials ETF are associated (or correlated) with IShares Financials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financials ETF has no effect on the direction of IShares Industrials i.e., IShares Industrials and IShares Financials go up and down completely randomly.
Pair Corralation between IShares Industrials and IShares Financials
Considering the 90-day investment horizon IShares Industrials is expected to generate 3.48 times less return on investment than IShares Financials. In addition to that, IShares Industrials is 1.2 times more volatile than iShares Financials ETF. It trades about 0.04 of its total potential returns per unit of risk. iShares Financials ETF is currently generating about 0.19 per unit of volatility. If you would invest 11,580 in iShares Financials ETF on November 18, 2024 and sell it today you would earn a total of 270.00 from holding iShares Financials ETF or generate 2.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Industrials ETF vs. iShares Financials ETF
Performance |
| Timeline |
| iShares Industrials ETF |
| iShares Financials ETF |
IShares Industrials and IShares Financials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Industrials and IShares Financials
The main advantage of trading using opposite IShares Industrials and IShares Financials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Industrials position performs unexpectedly, IShares Financials 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 Financials will offset losses from the drop in IShares Financials' long position.| IShares Industrials vs. iShares Consumer Discretionary | IShares Industrials vs. iShares Consumer Staples | IShares Industrials vs. iShares Basic Materials | IShares Industrials vs. iShares Utilities ETF |
| IShares Financials vs. iShares Financial Services | IShares Financials vs. iShares Industrials ETF | IShares Financials vs. iShares Consumer Discretionary | IShares Financials 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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