Correlation Between IShares Basic and IShares North
Can any of the company-specific risk be diversified away by investing in both IShares Basic and IShares North 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 Basic and IShares North into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Basic Materials and iShares North American, you can compare the effects of market volatilities on IShares Basic and IShares North 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 Basic with a short position of IShares North. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Basic and IShares North.
Diversification Opportunities for IShares Basic and IShares North
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IShares and IShares is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding iShares Basic Materials and iShares North American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares North American and IShares Basic 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 Basic Materials are associated (or correlated) with IShares North. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares North American has no effect on the direction of IShares Basic i.e., IShares Basic and IShares North go up and down completely randomly.
Pair Corralation between IShares Basic and IShares North
Considering the 90-day investment horizon IShares Basic is expected to generate 1.44 times less return on investment than IShares North. But when comparing it to its historical volatility, iShares Basic Materials is 1.1 times less risky than IShares North. It trades about 0.05 of its potential returns per unit of risk. iShares North American is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,703 in iShares North American on August 31, 2024 and sell it today you would earn a total of 1,001 from holding iShares North American or generate 27.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Basic Materials vs. iShares North American
Performance |
| Timeline |
| iShares Basic Materials |
| iShares North American |
IShares Basic and IShares North Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Basic and IShares North
The main advantage of trading using opposite IShares Basic and IShares North positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Basic position performs unexpectedly, IShares North 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 North will offset losses from the drop in IShares North's long position.| IShares Basic vs. Mast Global Battery | IShares Basic vs. Materials Select Sector | IShares Basic vs. Vanguard Materials Index | IShares Basic vs. SPDR SP Metals |
| IShares North vs. Mast Global Battery | IShares North vs. Materials Select Sector | IShares North vs. Vanguard Materials Index | IShares North vs. SPDR SP Metals |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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