Correlation Between US Bancorp and IShares Trust
Can any of the company-specific risk be diversified away by investing in both US Bancorp and IShares Trust 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 US Bancorp and IShares Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and iShares Trust , you can compare the effects of market volatilities on US Bancorp and IShares Trust 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 US Bancorp with a short position of IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and IShares Trust.
Diversification Opportunities for US Bancorp and IShares Trust
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USB and IShares is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust and US Bancorp 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 US Bancorp are associated (or correlated) with IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of US Bancorp i.e., US Bancorp and IShares Trust go up and down completely randomly.
Pair Corralation between US Bancorp and IShares Trust
Assuming the 90 days trading horizon US Bancorp is expected to generate 1.56 times more return on investment than IShares Trust. However, US Bancorp is 1.56 times more volatile than iShares Trust . It trades about 0.12 of its potential returns per unit of risk. iShares Trust is currently generating about 0.14 per unit of risk. If you would invest 53,514 in US Bancorp on August 29, 2024 and sell it today you would earn a total of 48,036 from holding US Bancorp or generate 89.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.6% |
| Values | Daily Returns |
US Bancorp vs. iShares Trust
Performance |
| Timeline |
| US Bancorp |
| iShares Trust |
US Bancorp and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and IShares Trust
The main advantage of trading using opposite US Bancorp and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp position performs unexpectedly, IShares Trust 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 Trust will offset losses from the drop in IShares Trust's long position.| US Bancorp vs. McEwen Mining | US Bancorp vs. Grupo Sports World | US Bancorp vs. Prudential Financial | US Bancorp vs. Samsung Electronics Co |
| IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust | IShares Trust vs. iShares Trust |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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