Correlation Between IShares Transportation and IShares Home
Can any of the company-specific risk be diversified away by investing in both IShares Transportation and IShares Home 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 Home 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 Home Construction, you can compare the effects of market volatilities on IShares Transportation and IShares Home 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 Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Transportation and IShares Home.
Diversification Opportunities for IShares Transportation and IShares Home
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IShares and IShares is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding iShares Transportation Average and iShares Home Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Home Construction 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 Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Home Construction has no effect on the direction of IShares Transportation i.e., IShares Transportation and IShares Home go up and down completely randomly.
Pair Corralation between IShares Transportation and IShares Home
Considering the 90-day investment horizon IShares Transportation is expected to generate 2.15 times less return on investment than IShares Home. But when comparing it to its historical volatility, iShares Transportation Average is 1.49 times less risky than IShares Home. It trades about 0.09 of its potential returns per unit of risk. iShares Home Construction is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 10,159 in iShares Home Construction on November 8, 2024 and sell it today you would earn a total of 440.00 from holding iShares Home Construction or generate 4.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Transportation Average vs. iShares Home Construction
Performance |
| Timeline |
| iShares Transportation |
| iShares Home Construction |
IShares Transportation and IShares Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Transportation and IShares Home
The main advantage of trading using opposite IShares Transportation and IShares Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Transportation position performs unexpectedly, IShares Home 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 Home will offset losses from the drop in IShares Home's long position.The idea behind iShares Transportation Average and iShares Home Construction 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 Home vs. SPDR SP Homebuilders | IShares Home vs. SPDR SP Retail | IShares Home vs. iShares Transportation Average | IShares Home vs. iShares Real Estate |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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