Correlation Between Octane All and IShares Financials
Can any of the company-specific risk be diversified away by investing in both Octane All and IShares Financials 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 Octane All and IShares Financials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Octane All Cap Value and iShares Financials ETF, you can compare the effects of market volatilities on Octane All and IShares Financials 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 Octane All with a short position of IShares Financials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Octane All and IShares Financials.
Diversification Opportunities for Octane All and IShares Financials
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Octane and IShares is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Octane All Cap Value and iShares Financials ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financials ETF and Octane All 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 Octane All Cap Value are associated (or correlated) with IShares Financials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financials ETF has no effect on the direction of Octane All i.e., Octane All and IShares Financials go up and down completely randomly.
Pair Corralation between Octane All and IShares Financials
Given the investment horizon of 90 days Octane All is expected to generate 2.5 times less return on investment than IShares Financials. But when comparing it to its historical volatility, Octane All Cap Value is 1.16 times less risky than IShares Financials. It trades about 0.14 of its potential returns per unit of risk. iShares Financials ETF is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 10,586 in iShares Financials ETF on September 4, 2024 and sell it today you would earn a total of 1,180 from holding iShares Financials ETF or generate 11.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Octane All Cap Value vs. iShares Financials ETF
Performance |
| Timeline |
| Octane All Cap |
| iShares Financials ETF |
Octane All and IShares Financials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Octane All and IShares Financials
The main advantage of trading using opposite Octane All and IShares Financials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Octane All position performs unexpectedly, IShares Financials 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 Financials will offset losses from the drop in IShares Financials' long position.| Octane All vs. iShares Basic Materials | Octane All vs. iShares Utilities ETF | Octane All vs. iShares Financials ETF | Octane All vs. iShares Healthcare ETF |
| IShares Financials vs. iShares Financial Services | IShares Financials vs. iShares Industrials ETF | IShares Financials vs. iShares Consumer Discretionary | IShares Financials vs. iShares Healthcare ETF |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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