Correlation Between Snap and IShares Technology
Can any of the company-specific risk be diversified away by investing in both Snap and IShares Technology 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 Snap and IShares Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and iShares Technology ETF, you can compare the effects of market volatilities on Snap and IShares Technology 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 Snap with a short position of IShares Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and IShares Technology.
Diversification Opportunities for Snap and IShares Technology
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Snap and IShares is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and iShares Technology ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Technology ETF and Snap 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 Snap Inc are associated (or correlated) with IShares Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Technology ETF has no effect on the direction of Snap i.e., Snap and IShares Technology go up and down completely randomly.
Pair Corralation between Snap and IShares Technology
Given the investment horizon of 90 days Snap Inc is expected to generate 3.41 times more return on investment than IShares Technology. However, Snap is 3.41 times more volatile than iShares Technology ETF. It trades about 0.09 of its potential returns per unit of risk. iShares Technology ETF is currently generating about 0.08 per unit of risk. If you would invest 1,071 in Snap Inc on August 27, 2024 and sell it today you would earn a total of 71.00 from holding Snap Inc or generate 6.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. iShares Technology ETF
Performance |
| Timeline |
| Snap Inc |
| iShares Technology ETF |
Snap and IShares Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and IShares Technology
The main advantage of trading using opposite Snap and IShares Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, IShares Technology 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 Technology will offset losses from the drop in IShares Technology's long position.The idea behind Snap Inc and iShares Technology ETF 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 Technology vs. Invesco DWA Utilities | IShares Technology vs. Invesco Dynamic Large | IShares Technology vs. Invesco Dynamic Large | IShares Technology vs. HUMANA INC |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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