Correlation Between IShares Transportation and IShares Global
Can any of the company-specific risk be diversified away by investing in both IShares Transportation and IShares Global 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 Transportation and IShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Transportation Average and iShares Global Industrials, you can compare the effects of market volatilities on IShares Transportation and IShares Global 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 Transportation with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Transportation and IShares Global.
Diversification Opportunities for IShares Transportation and IShares Global
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding iShares Transportation Average and iShares Global Industrials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Indus and IShares Transportation 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 Transportation Average are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Indus has no effect on the direction of IShares Transportation i.e., IShares Transportation and IShares Global go up and down completely randomly.
Pair Corralation between IShares Transportation and IShares Global
Considering the 90-day investment horizon iShares Transportation Average is expected to generate 1.87 times more return on investment than IShares Global. However, IShares Transportation is 1.87 times more volatile than iShares Global Industrials. It trades about 0.23 of its potential returns per unit of risk. iShares Global Industrials is currently generating about 0.15 per unit of risk. If you would invest 7,019 in iShares Transportation Average on August 27, 2024 and sell it today you would earn a total of 521.00 from holding iShares Transportation Average or generate 7.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Transportation Average vs. iShares Global Industrials
Performance |
| Timeline |
| iShares Transportation |
| iShares Global Indus |
IShares Transportation and IShares Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Transportation and IShares Global
The main advantage of trading using opposite IShares Transportation and IShares Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Transportation position performs unexpectedly, IShares Global 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 Global will offset losses from the drop in IShares Global's long position.The idea behind iShares Transportation Average and iShares Global Industrials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
| IShares Global vs. Gabelli ETFs Trust | IShares Global vs. First Trust Exchange Traded | IShares Global vs. Northern Lights | IShares Global vs. First Trust Exchange Traded |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |