Correlation Between ETRACS 2xMonthly and IShares Financial
Can any of the company-specific risk be diversified away by investing in both ETRACS 2xMonthly and IShares Financial 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 ETRACS 2xMonthly and IShares Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ETRACS 2xMonthly Pay and iShares Financial Services, you can compare the effects of market volatilities on ETRACS 2xMonthly and IShares Financial 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 ETRACS 2xMonthly with a short position of IShares Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETRACS 2xMonthly and IShares Financial.
Diversification Opportunities for ETRACS 2xMonthly and IShares Financial
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between ETRACS and IShares is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding ETRACS 2xMonthly Pay and iShares Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Financial and ETRACS 2xMonthly 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 ETRACS 2xMonthly Pay are associated (or correlated) with IShares Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Financial has no effect on the direction of ETRACS 2xMonthly i.e., ETRACS 2xMonthly and IShares Financial go up and down completely randomly.
Pair Corralation between ETRACS 2xMonthly and IShares Financial
Given the investment horizon of 90 days ETRACS 2xMonthly is expected to generate 2.31 times less return on investment than IShares Financial. In addition to that, ETRACS 2xMonthly is 1.58 times more volatile than iShares Financial Services. It trades about 0.04 of its total potential returns per unit of risk. iShares Financial Services is currently generating about 0.14 per unit of volatility. If you would invest 5,186 in iShares Financial Services on August 28, 2024 and sell it today you would earn a total of 3,023 from holding iShares Financial Services or generate 58.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ETRACS 2xMonthly Pay vs. iShares Financial Services
Performance |
| Timeline |
| ETRACS 2xMonthly Pay |
| iShares Financial |
ETRACS 2xMonthly and IShares Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ETRACS 2xMonthly and IShares Financial
The main advantage of trading using opposite ETRACS 2xMonthly and IShares Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETRACS 2xMonthly position performs unexpectedly, IShares Financial 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 Financial will offset losses from the drop in IShares Financial's long position.| ETRACS 2xMonthly vs. ETRACS 2xMonthly Pay | ETRACS 2xMonthly vs. ETRACS Monthly Pay | ETRACS 2xMonthly vs. ETRACS Monthly Pay | ETRACS 2xMonthly vs. ETRACS Monthly Pay |
| IShares Financial vs. iShares Financials ETF | IShares Financial vs. iShares Consumer Discretionary | IShares Financial vs. iShares Industrials ETF | IShares Financial vs. iShares Consumer Staples |
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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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