Correlation Between Financial Select and IShares IBonds
Can any of the company-specific risk be diversified away by investing in both Financial Select and IShares IBonds 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 IBonds 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 iBonds Dec, you can compare the effects of market volatilities on Financial Select and IShares IBonds 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 IBonds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Select and IShares IBonds.
Diversification Opportunities for Financial Select and IShares IBonds
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Financial and IShares is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Financial Select Sector and iShares iBonds Dec in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares iBonds Dec 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 IBonds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares iBonds Dec has no effect on the direction of Financial Select i.e., Financial Select and IShares IBonds go up and down completely randomly.
Pair Corralation between Financial Select and IShares IBonds
Considering the 90-day investment horizon Financial Select Sector is expected to generate 9.72 times more return on investment than IShares IBonds. However, Financial Select is 9.72 times more volatile than iShares iBonds Dec. It trades about 0.1 of its potential returns per unit of risk. iShares iBonds Dec is currently generating about 0.09 per unit of risk. If you would invest 3,335 in Financial Select Sector on August 28, 2024 and sell it today you would earn a total of 1,781 from holding Financial Select Sector or generate 53.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Select Sector vs. iShares iBonds Dec
Performance |
| Timeline |
| Financial Select Sector |
| iShares iBonds Dec |
Financial Select and IShares IBonds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Select and IShares IBonds
The main advantage of trading using opposite Financial Select and IShares IBonds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Select position performs unexpectedly, IShares IBonds 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 IBonds will offset losses from the drop in IShares IBonds' 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 IBonds vs. iShares iBonds Dec | IShares IBonds vs. iShares iBonds Dec | IShares IBonds vs. iShares Trust | IShares IBonds 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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