Correlation Between IShares Technology and Technology Select
Can any of the company-specific risk be diversified away by investing in both IShares Technology and Technology Select 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 Technology and Technology Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Technology ETF and Technology Select Sector, you can compare the effects of market volatilities on IShares Technology and Technology Select 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 Technology with a short position of Technology Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Technology and Technology Select.
Diversification Opportunities for IShares Technology and Technology Select
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between IShares and Technology is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding iShares Technology ETF and Technology Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Technology Select Sector and IShares Technology 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 Technology ETF are associated (or correlated) with Technology Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Technology Select Sector has no effect on the direction of IShares Technology i.e., IShares Technology and Technology Select go up and down completely randomly.
Pair Corralation between IShares Technology and Technology Select
Considering the 90-day investment horizon iShares Technology ETF is expected to generate 0.98 times more return on investment than Technology Select. However, iShares Technology ETF is 1.02 times less risky than Technology Select. It trades about 0.06 of its potential returns per unit of risk. Technology Select Sector is currently generating about 0.04 per unit of risk. If you would invest 13,158 in iShares Technology ETF on November 3, 2024 and sell it today you would earn a total of 2,809 from holding iShares Technology ETF or generate 21.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Technology ETF vs. Technology Select Sector
Performance |
| Timeline |
| iShares Technology ETF |
| Technology Select Sector |
IShares Technology and Technology Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Technology and Technology Select
The main advantage of trading using opposite IShares Technology and Technology Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Technology position performs unexpectedly, Technology Select 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 Technology Select will offset losses from the drop in Technology Select's long position.| IShares Technology vs. iShares Healthcare ETF | IShares Technology vs. iShares Financials ETF | IShares Technology vs. iShares Telecommunications ETF | IShares Technology vs. iShares Industrials ETF |
| Technology Select vs. iShares Exponential Technologies | Technology Select vs. ALPS Disruptive Technologies | Technology Select vs. First Trust Dow | Technology Select vs. Fidelity MSCI Information |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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