Correlation Between IShares Industrials and IShares Financial
Can any of the company-specific risk be diversified away by investing in both IShares Industrials and IShares Financial 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 Financial 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 Financial Services, you can compare the effects of market volatilities on IShares Industrials and IShares Financial 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 Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Industrials and IShares Financial.
Diversification Opportunities for IShares Industrials and IShares Financial
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and IShares is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding iShares Industrials ETF and iShares Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financial 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 Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financial has no effect on the direction of IShares Industrials i.e., IShares Industrials and IShares Financial go up and down completely randomly.
Pair Corralation between IShares Industrials and IShares Financial
Considering the 90-day investment horizon IShares Industrials is expected to generate 1.35 times less return on investment than IShares Financial. But when comparing it to its historical volatility, iShares Industrials ETF is 1.17 times less risky than IShares Financial. It trades about 0.14 of its potential returns per unit of risk. iShares Financial Services is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 5,555 in iShares Financial Services on August 29, 2024 and sell it today you would earn a total of 2,651 from holding iShares Financial Services or generate 47.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Industrials ETF vs. iShares Financial Services
Performance |
| Timeline |
| iShares Industrials ETF |
| iShares Financial |
IShares Industrials and IShares Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Industrials and IShares Financial
The main advantage of trading using opposite IShares Industrials and IShares Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Industrials position performs unexpectedly, IShares Financial 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 Financial will offset losses from the drop in IShares Financial's 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 Financial vs. iShares Financials ETF | IShares Financial vs. iShares Consumer Discretionary | IShares Financial vs. iShares Industrials ETF | IShares Financial vs. iShares Consumer Staples |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume |