Correlation Between Financial Select and IShares
Can any of the company-specific risk be diversified away by investing in both Financial Select and IShares 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 Financial Select and IShares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Select Sector and IShares, you can compare the effects of market volatilities on Financial Select and IShares 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 Financial Select with a short position of IShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and IShares.
Diversification Opportunities for Financial Select and IShares
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Financial and IShares is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares and Financial Select 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 Financial Select Sector are associated (or correlated) with IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of Financial Select i.e., Financial Select and IShares go up and down completely randomly.
Pair Corralation between Financial Select and IShares
If you would invest 4,713 in Financial Select Sector on August 31, 2024 and sell it today you would earn a total of 413.00 from holding Financial Select Sector or generate 8.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 4.55% |
| Values | Daily Returns |
Financial Select Sector vs. IShares
Performance |
| Timeline |
| Financial Select Sector |
| IShares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Financial Select and IShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Select and IShares
The main advantage of trading using opposite Financial Select and IShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Select position performs unexpectedly, IShares 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 will offset losses from the drop in IShares' long position.| Financial Select vs. Energy Select Sector | Financial Select vs. Technology Select Sector | Financial Select vs. Health Care Select | Financial Select vs. Industrial Select Sector |
| IShares vs. iShares iBonds Dec | IShares vs. iShares iBonds Dec | IShares vs. iShares iBonds Dec | IShares vs. iShares iBonds Dec |
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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| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated |