Correlation Between IShares Consumer and IShares Industrials
Can any of the company-specific risk be diversified away by investing in both IShares Consumer 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 Consumer 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 Consumer Staples and iShares Industrials ETF, you can compare the effects of market volatilities on IShares Consumer 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 Consumer with a short position of IShares Industrials. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Consumer and IShares Industrials.
Diversification Opportunities for IShares Consumer and IShares Industrials
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between IShares and IShares is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding iShares Consumer Staples 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 Consumer 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 Consumer Staples 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 Consumer i.e., IShares Consumer and IShares Industrials go up and down completely randomly.
Pair Corralation between IShares Consumer and IShares Industrials
Considering the 90-day investment horizon IShares Consumer is expected to generate 5.18 times less return on investment than IShares Industrials. But when comparing it to its historical volatility, iShares Consumer Staples is 1.36 times less risky than IShares Industrials. It trades about 0.02 of its potential returns per unit of risk. iShares Industrials ETF is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 9,585 in iShares Industrials ETF on August 27, 2024 and sell it today you would earn a total of 4,654 from holding iShares Industrials ETF or generate 48.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Consumer Staples vs. iShares Industrials ETF
Performance |
| Timeline |
| iShares Consumer Staples |
| iShares Industrials ETF |
IShares Consumer and IShares Industrials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Consumer and IShares Industrials
The main advantage of trading using opposite IShares Consumer and IShares Industrials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Consumer 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 Consumer vs. iShares Consumer Discretionary | IShares Consumer vs. iShares Industrials ETF | IShares Consumer vs. iShares Utilities ETF | IShares Consumer vs. iShares Basic Materials |
| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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