Correlation Between IShares Global and Utilities Select
Can any of the company-specific risk be diversified away by investing in both IShares Global and Utilities 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 Global and Utilities Select into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between iShares Global Utilities and Utilities Select Sector, you can compare the effects of market volatilities on IShares Global and Utilities 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 Global with a short position of Utilities Select. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Global and Utilities Select.
Diversification Opportunities for IShares Global and Utilities Select
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IShares and Utilities is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding iShares Global Utilities and Utilities Select Sector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Select Sector and IShares Global 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 Global Utilities are associated (or correlated) with Utilities Select. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Select Sector has no effect on the direction of IShares Global i.e., IShares Global and Utilities Select go up and down completely randomly.
Pair Corralation between IShares Global and Utilities Select
Considering the 90-day investment horizon IShares Global is expected to generate 1.63 times less return on investment than Utilities Select. But when comparing it to its historical volatility, iShares Global Utilities is 1.23 times less risky than Utilities Select. It trades about 0.13 of its potential returns per unit of risk. Utilities Select Sector is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 7,991 in Utilities Select Sector on September 1, 2024 and sell it today you would earn a total of 302.00 from holding Utilities Select Sector or generate 3.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
iShares Global Utilities vs. Utilities Select Sector
Performance |
| Timeline |
| iShares Global Utilities |
| Utilities Select Sector |
IShares Global and Utilities Select Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IShares Global and Utilities Select
The main advantage of trading using opposite IShares Global and Utilities Select positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Global position performs unexpectedly, Utilities 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 Utilities Select will offset losses from the drop in Utilities Select's long position.| IShares Global vs. iShares Global Consumer | IShares Global vs. iShares Global Industrials | IShares Global vs. iShares Global Consumer | IShares Global vs. iShares Global Materials |
| Utilities Select vs. Consumer Staples Select | Utilities Select vs. Industrial Select Sector | Utilities Select vs. Materials Select Sector | Utilities Select vs. Health Care Select |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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